A QUEASY WAY OUT

Dimon warns of risks from Fed’s QE ‘unwinding’

Jamie Dimon warned on Tuesday that the Federal Reserve’s unprecedented chore of unwinding its massive bond-buying programs could be “more disruptive than people think.”

“We’ve never have had [quantitative easing] like this before, we’ve never had unwinding like this before,” the JPMorgan Chase chief executive said in a speech in Paris.

The Fed, which has been slowly raising interest rates for about a year and a half, announced last month that it soon would reverse course on another easy-money policy and start selling some its $4.5 trillion or so of bonds.

Since the financial crisis, in a bid to keep rates low in order to allow the US economy a better chance at regaining its strength, the Fed has amassed more than $3.5 trillion in Treasury and mortgage bonds.

Dimon, who spoke mostly about Brexit during the conference, did lean into the Fed and its QE unwinding and said that markets could be in for a shock — simply because a sale of this scale has never happened before.

“We act like we know exactly how it’s going to happen, and we don’t, because central banks don’t really have a choice,” Dimon said. “They would like to provide all of you with certainty, but you cannot make things certain that are uncertain.”

This wouldn’t be the first time that Wall Street had freaked out over the central bank tightening markets.

In 2013, when then-Chairman Ben Bernanke announced the Fed would gradually reduce the amount of bonds it would buy, a massive sell-off known as the “taper tantrum” ensued, on fears that he was getting too hawkish too fast.

Wall Street had a mixed reaction to Dimon’s comments, but acknowledged there could be bumpy markets ahead.

“My takeaway wasn’t, ‘No one knows and it could be bad,’ ” David Bianco, chief investment officer at Deutsche Bank Asset Management, said during a Q&A with reporters. “It was like, ‘No one knows, and let’s not be confident on estimating the sensitivity.’ ”