In an exclusive interview, JPMorgan Chase CEO Jamie Dimon (JPM) speaks with Yahoo Finance Executive Editor Brian Sozzi from the Chase for Business "Make Your Move Summit" in Frisco, Texas.

Dimon first weighed in on the Federal Reserve's decision to keep its interest rate hiking cycle on pause. "I think they did the right thing to raise rates rapidly and I think they are kind of right to pause here a little bit and see what happens. But I suspect that they might not be done," Dimon said, adding that "there's a chance inflation is a little bit stickier than people think."

When it comes to the consumer, Dimon thinks they are in "rather good shape" given low unemployment and high home equity values. Dimon cautioned, however, that lower-income consumers have spent the excess savings they built up during the pandemic. "The middle class is getting close to zero, no excess savings," Dimon said, "but they still have jobs and wages are going up."

Dimon thinks there may be a "sea change" in the economy, noting factors like government spending and an aging population. Dimon said of the future: "I don't see anything which is...disinflationary."

Dimon also had strong words for leaders in Washington. "D.C. goes out of its way to make it hard...for small to large businesses to grow and expand," Dimon said. "Some of our regulations are, they're barnacles. They've been there for years. They should be taken away because they're just slowing down growth. I mean, I'm in favor of good regulations, just not endless regulations."

Dimon added that geopolitical concerns such as the Israel-Hamas war and Russia's invasion of Ukraine remain top of mind, advising the average investor to keep things like global shocks in perspective, saying "look at a potential range of outcomes and...how you feel about if those range of outcomes happened, so you've really thought it through."

Key video moments

00:00:45 Dimon on the Fed's path

00:03:50 Dimon’s take on housing

00:06:30 Dimon on the "sea change" in the economy and higher for longer rates

00:08:30 Dimon on the deficit

00:10:00 Dimon on lending to businesses

00:11:50 Dimon describes the state of the U.S. consumer

00:13:00 How Dimon feels about the U.S. government

00:16:30 Dimon on his biggest concerns, geopolitical events

00:19:50 Dimon on why he's hopeful for America

00:21:45 Dimon's message for small businesses

Video Transcript

BRIAN SOZZI: Welcome to special coverage on Yahoo Finance on what has been a very busy day for markets and the economy. I'm Brian Sozzi. And we are live from Frisco, Texas at JP JPMorgan Chase "Make Your Move Summit." Big focus on small businesses, the health of small businesses, and the outlook for these small businesses. And let's chat more on this with our very, very, very, very special guest JPMorgan Chase chairman and CEO Jamie Dimon. Jamie, thank you for doing this. Good to see you again.

JAMIE DIMON: Good to be here.

BRIAN SOZZI: Appreciate it. So we're going to talk about the health of small businesses. This conference is going to be very, very packed tomorrow. But first, we're a few hours removed from Fed decision day. Your assessment of what we heard from the Fed.

JAMIE DIMON: Well, my real assessment doesn't matter that much because we don't know the future state of the economy, which they've basically been telling you now for months. And I think they did the right thing to raise rates rapidly. And I think they're right to pause here a little bit and see what happens. But I suspect that they may not be done. I think there's a chance that inflation is just a little stickier than people think. And the fiscal and monetary stimulus of the last several years is more than people think, unemployment is very low. We'll see.

BRIAN SOZZI: They have a long way to go on inflation. I think Chairman Powell, Jerome Powell made that very clear. How much higher do you think they have to go on rates?

JAMIE DIMON: So you have two separate rates since the short end, and it's called the 10 year. And on the short end, they are 5 and 3/8, whatever, maybe 25, 50, 75 more. And I'm not predicting that, I just think there's a higher chance than probably other people think. The 10-year is not set by them. So that went up, they influence it with words and stuff like that. But that's supply and demand of buyers of bonds from around the world.

The supply is up dramatically much more than people would have expected even a year ago. And QT is also increasing the supply of bonds out there. So is Japan, China, and some other prior buyers. So that I think there may be pressure in that 10-year rate to go up. Inflation is stickier. It's not a normal to have a 5 and 1/2, or 6%, or even 7% 10-year rate.

And I don't look at that as a prediction, I look at that as becoming more like risk management. Don't rule it out when you look at how you manage your company, that rates can go a little bit higher. I should also point out that spreads are still very low. So credit spreads themselves can go up, so it could be a little bit of a double whammy for borrowers.

BRIAN SOZZI: Has the economy felt the impact of the Fed's rate hikes? And then I know you've talked a lot about quantitative tightening. Has markets and the economy felt these things yet?

JAMIE DIMON: Yeah. So the Fed, you see it-- remember mortgages are largely fixed rates, but it's clearly affecting house sales, home sales, and stuff like that. Not home prices yet, there's still a lot of money out there. But it's affecting auto sales and credit card. Over time, it'll affect businesses that have to refinance any floating rate bonds. So of course, it's depressing certain economic activity. It's hard to figure out exactly how much.

Quantitative tighten is almost more of a technical thing, like what's enough, when's enough. I personally believe that, at one point, it will rattle the markets. It did in March 2020, it did, if you go back to '19, market makers are more-- they can't do as much as they used to do for a whole bunch of different regulatory reasons. And so I think, at one point, yeah, you're going to see markets get a little rattled.

BRIAN SOZZI: Where does that rattling show up first, you think?

JAMIE DIMON: Treasuries.

BRIAN SOZZI: Treasuries.

JAMIE DIMON: Yeah.

BRIAN SOZZI: And that hasn't-- has the treasury market been rattled already just given the ascent we've seen in the 10-year?

JAMIE DIMON: Not-- well, if you look at-- not really, but liquidity has come in. And you should try to keep an eye on that. And like I said, there's more issuance, and the issuance has to be bought, and that may push the price higher. We haven't seen real pressure in the repo markets, the overnight markets.

BRIAN SOZZI: Chair Powell mentioned the 8% mortgage. And he sounded somewhat uncertain what that may or may not mean to the housing market next year. What are you seeing in housing in this country given where rates are?

JAMIE DIMON: Well, first of all, the big thing but keep in mind also, very different than prior times. We have still a lot of fiscal stimulus with very low unemployment. And consumers, actually, in rather good shape, they have low unemployment-- low unemployment. Home prices and asset prices gone up for the better part of 15 years. They maybe now now, but their equity in their home is at all time records.

They locked in a lot of fixed rate financing, particularly in mortgages, which are like 70% of consumer borrowing. So they're actually in pretty good shape. But it's definitely dampening new home buyers, slowing down people's ability to move. People today are doing adjustable rate mortgages, but the cost of carrying a mortgage is higher. So buyers either are going to buy a smaller house, which is a choice, or they're going to wait or not buy at all.

BRIAN SOZZI: What should-- there's a lot of regular average people using Yahoo Finance consistently. That's the hallmark of our platform. What should they be prepared for in terms of the economy because of where rates are right now?

JAMIE DIMON: I think the most important thing you think about the world is think about it broadly. And don't just try to guess that there's one thing that's going to happen. Almost no one has ever forecasted accurately like what I call real inflection points. And so when I look at it, again, as a risk management thing, the most important thing is taking place as geopolitical. It's Ukraine, Israel, war, death, free nations in Europe. It's affecting everything.

Obviously, humanitarian crisis. It's affecting global trade, global alliances, very importantly America, China. So I put that as-- I would put that in the worry category. You don't know, and I don't want to-- this is so important the geopolitical part. Yes, it'll have an effect on the economy. And it'll may determine whether the economy goes to a hard landing or a soft line, but we don't know that yet. I mean, hopefully, these things will diminish, but they may not.

So as someone running a company, I try to run the company, such that whatever the range of potential economic outcomes are, we could serve our clients. We'll be there in thick or thin. We can bank cities, states, schools, hospitals, individuals that we can invest in our technology. There are all these small businesses who rely on us that we're there for them through thick or thin. We're building, we're growing, and we can manage the economy, which I look like the weather.

So I guess my advice is look at a potential range of outcomes and challenge yourself how you feel about if those range of outcomes happened. So you've really thought it through. And you do that before you say, this is what I think is going to happen.

BRIAN SOZZI: In terms of higher for longer rates, is that the new normal? And what does it mean for big banks like JPMorgan?

JAMIE DIMON: So I personally think we may have had a sea change, and the sea change was that we've had 20 years plus of lower rates. Now, all of a sudden, it looks to me there's a lot of long-term inflation. So if we get monthly numbers and stuff like that. Long-term inflationary effects, a $2 trillion dollars deficit, the largest peacetime deficit ever, the largest peacetime deficit with all time unemployment lows.

But you also have commitments that are being made. The IRA act, the CHIPS Act, the green economy we think will eventually cause $4 trillion dollars. I hope it's well spent, though, I suspect a lot of it will not be well spent. In Europe, when oil and gas prices went way up, they basically financed it for all consumers and producers. So government-- and then we have aging populations, Social Security, Medicare--

BRIAN SOZZI: There's a lot of concerns.

JAMIE DIMON: But there are a lot of things which I say are future inflationary. I don't see anything which is future disinflationary. Now, of course, recession is disinflationary, but I see all these trends. So it may be a sea change so that if you go back to the 70s or 80s, rates were higher, they were more volatile, people didn't-- no one looked at a 2% rate like that was normal.

BRIAN SOZZI: Have the seeds been planted for something like a Volcker recession look? I'm not asking you to predict a recession. Have the seeds been planted?

JAMIE DIMON: Well, when you say Volcker recession. Remember, interest rates got to 14.75 in the 20 year bond in 1982. I mean, unemployment hit 10 or 11. So I don't think we're going to go there. Like I said, the consumer is in very good shape. So even if we go into a recession, the consumer is going in better shape than they've gone into most recessions. And companies are still hiring workers, so it's not quite clear. I mean, I wouldn't call it that bad. I just think that there's a lot of deficit financing. And that may cause long-term rates to go and stay higher in inflation for a little bit longer.

BRIAN SOZZI: How concerned are you about the deficit? And what do these rising deficits ultimately mean to the economy longer term?

JAMIE DIMON: You said, what does it do for JPMorgan? JPMorgan, we run the company, such that if there were 7% or 8% long bond rates, we're going to be fine. We're not guessing for it, but we stress for it. So we stress for a whole bunch of different things basically to make sure we can handle low rates, high rates, high rates with inflation, high rates with recession, high rates with real estate losses, that no matter what those are, the JPMorgan is still in pretty good shape.

BRIAN SOZZI: Fortress balance sheet.

JAMIE DIMON: And pretty good shape means that we can serve our clients regardless of that. That's what it means to me. Not like, well, if that happens, I got to pull back, I can't invest, I can't grow, I can't serve people. And so we'll be fine I suspect to those higher rates. Warren Buffett talks about when the tide goes out, you see dressing, swimming naked. You're going to see quite a few people swimming naked. They had embedded rate intraday exposure they didn't understand. They couldn't take the double whammy of stagflation or bad real estate or something like that.

Any business person, what I always talk to small businesses, I always say be prepared for a range of events. If you're a restaurant and you have only so much extra days of cash on hand and then you have a hurricane like Superstorm Sandy, that can bankrupt you. But you don't want that to happen because you should think through what you need to protect yourselves against certain outcomes that are possible, hopefully unlikely, hopefully don't happen, but are possible.

BRIAN SOZZI: On the ride over here, Jamie, I see all the new buildings and things going up here in this area in Texas and I see the economic activity, but then I hear stories about higher rates, economic slowdowns. From a JP Morgan perspective, are you tightening your lending to businesses?

JAMIE DIMON: I call it trimming the sails. You always do it a little bit. So we weren't big in subprime auto, but people are trimming the sails there and they should. We're not really big in subprime credit card. Real estate a little bit because commercial real estate, there's too much vacancies. And so you're not going to be doing the same kind of activity you were doing before.

I mean, we should point this state is amazing. I hope a bunch of you guys are from Texas. I mean, this state has been booming. It's been conducive to business. They're making it good to come here. And that's infrastructure, education, housing, you name it. So we now have 10,000 people in Plano we didn't have before. We bank, I think, we bank 6 or 7 million small businesses around the country, which is almost double what it was like seven or eight years ago. And small business formation has gone up dramatically with COVID.

But I have to remind the people, small business formation, it doesn't happen on its own. The 10,000 people we had in Plano probably have 20,000 people in small business servicing them. And that could be barbers taking care of a house, electrician, lawyers, engineers, consultants, people who are not at JPMorgan but they're part of our ecosystem now. So this is the vibrant economy you want. We should make sure we keep it that way here. We now have more employees in Texas than we have in New York.

BRIAN SOZZI: Wow. 17,500?

JAMIE DIMON: No. In Texas, we have 30,000, something like that. In New York, it's now 26. When I got to JPMorgan in 2004, we had 12,000 here.

BRIAN SOZZI: Wow.

JAMIE DIMON: And New York was like 36,000.

BRIAN SOZZI: I'm an avid consumer of JPMorgan research. I start my day--

JAMIE DIMON: They are unbelievable.

BRIAN SOZZI: They are awesome.

JAMIE DIMON: They're awesome.

BRIAN SOZZI: So they put out a really interesting note today, one stat that stood out to me, and I have to get your take. It said this. For the middle class, real liquidity is back to pre-COVID level while the bottom 40% are worse off compared to before. Why is this happening?

JAMIE DIMON: Well, what happened was if this was the average checking account, and make believe it's all one consumer, all that money, at one point, they had multiples of what they had pre-COVID. That money is being spent down. If you look at that, what I just said, you look at the lower-- and there are different ways of looking at it, it's hard to tell some inflation adjusts and some don't. But it looks like the lower call it the third is back to where it was pre-COVID. They don't have excess savings anymore.

And that the middle class is getting close to zero, no excess savings, but they still have jobs, and wages are going up. And then, obviously, wealthy people still have excess and stuff like that. We've seen that number coming down. A matter of fact, I saw three forecasts the other day. One said-- all from JP Morgan. One said, it's going to come down by the end of the, I guess, by the first quarter of next year, one is a third quarter next year, one is the end of next year. Like I said, there are a lot of different ways to measure. It

BRIAN SOZZI: You mentioned in your annual letter earlier this year, another great quote. You said, we require a 21st century government. I imagine what we're seeing currently in DC is not what you had in mind.

JAMIE DIMON: I mean, I'm begging Texas don't become like DC. I mean, DC goes out of its way to make it hard for small to large businesses to grow and expand. When I'm talking about theirs, we need-- and it's not everywhere, but inner city schools have to do a better job getting their kids' education to get them a job, making $50,000, $60,000, $70,000 a year.

Our infrastructure, which you see when you drive around, and if you go to Hong Kong or Singapore, it's a little embarrassing. Some of our regulations are they're barnacles, they've been there for years. They should be taken away because they're just slowing down growth. I'm in favor of good regulations, just not endless regulations. And our litigation system, in many cases, is slow, capricious, arbitrary, and very expensive. And if it led to more justice, you and I might say, that's a good thing.

Our health care system, we have the best in the world. Pharma doctors, science hospitals, which I'm a big beneficiary of, we have some of the worst outcomes in the world. Child mortality has gotten worse. Mother mortality has gotten worse. Obesity has gone higher. I don't think we've done a good job taking care of our lower paid citizens. They're the ones who lost their job in COVID. They often live in a part time with more crime. They often don't have medical insurance. I think we've done a terrible job, in some cases. I think we have to do a better job for society as a whole.

BRIAN SOZZI: Well, how does this administration do a better job? Last year before election, November what, November 7th, how can they do a better job? What would you like to see from them?

JAMIE DIMON: I tell them privately what I think they should do or not do.

BRIAN SOZZI: Is there a way--

JAMIE DIMON: Some of these things are not Democrat or Republican. I mean, the FAA needs to be updated. That's been true for 20 years. We have an antiquated technology system. I think almost everyone else around the world has a modern technology system, ours is still those green screens that don't adjust quickly and it's dangerous. Someone told me that, not only is that, 20% more CO2 in a flight and 20 minutes on the average flight. Just for that.

BRIAN SOZZI: In terms of just growth, are there policies that this administration has put forward that have excited you and that you could be hopeful for?

JAMIE DIMON: Yeah. I think, in some ways, we had to do a CHIPS Act. If you want-- I think we need to have some of that built here for our own safety and security. So I think that's probably good. I think part of the-- I'm in favor of the Infrastructure Act. We need infrastructure and part of the IRA act. Both on infrastructure and IRA, though, I think they should come-- they should have come with twins and they didn't.

Those twins to me would be fast permitting because you see every single day you can't build certain things. It could be pipelines, it could be solar, it could be wind, it could be roads. Because it takes 10 years to get permits, and that makes the capital costs much higher and people are canceling those projects. And the second is you've got to stop the social engineering. It's bad economics. It dramatically reduce the efficiency and it also opens up the corporate trough.

They're begging to get not just money from the federal government, but from the city, from the state. And it shouldn't have social engineering. It shouldn't require unions. It shouldn't require place-based child care, which most companies do anyway. It should just be a tax credit to do X and no other interference. Unfortunately, the other interference is growing dramatically.

BRIAN SOZZI: I'm of the view that you take what you say very carefully and you put a lot of thought into it. So it really took me by surprise on the last earnings release when you said, "This is the most dangerous time in the world that you have seen." Can you just expand upon that? What are you most concerned about?

JAMIE DIMON: Well, it started before the terrorism in Israel with the Ukraine war. I knew it the day afterwards. A free Democratic European nation was invaded by hundreds of thousands of well-armed troops of Russia protected by nuclear blackmail. And that nuclear blackmail part, just put in the back of your mind, you want to scare people. If you have nuclear proliferation, that's the worst thing.

At the time we said we don't know how it's going to end and when it's going to end, now it's not quite two years but it'll be two years in February. You have 600,000 casualties along a 600-mile front with no real end in sight. And it's affecting obviously humanitarian crisis, but oil and food security is paramount. It showed the world we don't really have that, it's stretching all alliances. People trying to figure out who's on what side here. And obviously, the most important is it's hurting and damaging the ability of China and America to strike a better relationship.

And then you have the Israeli terrorist act. Those things are bad. I look at the Berlin Wall, that went up and came down, not a bullet was fired. You have 600,000 casualties here. And so I look at it, this is maybe a little bit more like pre World War II. We got to get this right. I like the fact that the Biden administration, and others now, Mitch McConnell. Leaders are saying, we need to take care of this, it is for America.

Because if we don't fix this, the world may not be completely safe for freedom and democracy as we know it for the next 100 years. And to do it, by the way, we need very-- obviously, the military stuff is important. We also need diplomacy, development finance, we have to work with our allies. So one of the problems of the IRA act was it irritated all our allies. We don't want to tear asunder the economic alliances because all these other people are going to cherry pick. And so we have to be very careful how this gets navigated over the next 5 or 10 years.

BRIAN SOZZI: In light of these challenging geopolitical situations, the dysfunction we're seeing in government, is that hurting our standing in the world at such a critical time?

JAMIE DIMON: America. I think the way you should look it in the world is, if we reach out our hands to people, people are going to take it. They may get mad at us sometimes being a little arrogant, a little bit thoughtless, but we are trusted. And we're the only ones, and I'm not saying this as an arrogant American. We're the only ones who can provide the leadership because we have the military, the muscle, the might, the money, the capability.

We've got to do it in conjunction with allies. It can't be the ugly American. We're not going get in our own way every time. And I think they understand that. They are rattled by when they see-- if you look at American policy, it's been less consistent. So they do say, can we trust you? Will you be there? Will the treaty stand? And those are legitimate concerns. It's not over, but we've created a certain amount of uncertainty I wish we hadn't.

BRIAN SOZZI: You've sounded cautious on the economy and you have someone in the past, but you've always been upbeat about America. What are you so hopeful for about America looking out over the next decade?

JAMIE DIMON: Listen, I just met with Bloomberg, and I told them the same thing I'm going to tell you. I am a full-throated, red-blooded, patriotic, free enterprise, proud American. This country is the most prosperous nation the world has ever seen.

Of course, we have flaws, there is not a nation the planet doesn't, but we are, and we're a moral nation. We didn't go to war in World War I and World War II to grab land or oil or money or gold or any of that, and then we did the Marshall Plan. I think we need to do Marshall plans again to help some of these other folks because that is the forefront of keeping the world safe for democracy. I'm proud of that. It's still the most prosperous nation the world has ever seen.

And when people, look at China, we have 80,000 per person GDP, theirs is 15. We've got wonderful neighbors. We've got the best military in the world. We've got the most innovation the world has ever seen. And that innovation, it used to be like Boston and Silicon Valley, it's now here. It's Austin, it's Nashville. And it's also going overseas, by the way. I'm surprised now when I go to Berlin and Paris and London, they've got quite a bit of it too, which I think is great.

And so we have all that and we should applaud that. And we should sing the praises of that and we should help and we should grow. Acknowledging we didn't take care of the bottom 25% very well. And that's after decades of trying. And I think there are things to fix that, like I would double the earned income tax credit. I know Republicans and Democrats who would do that. So I think there are things we can do that could strengthen the country, help the lower end, and get the country growing more.

And the other thing we got to talk about more is growth is the way out of this fiscal mess we're in. Growth will drive more tax receipts, more jobs, more capability, more production, more supply side. And we don't spend enough time talking about what fosters growth. Here, they do. I mean, look at the difference of Texas versus some other--

BRIAN SOZZI: Well, small businesses foster growth. To the small businesses here, 2,000 people are going to show up at this conference, three-day conference here in Frisco, Texas. They are concerned about inflation, they're concerned about the economy. What's your message to them? How can they grow their businesses?

JAMIE DIMON: First of all, my first message, I'm proud of them. If you talk to anyone who's ever started a small business. And I always do this here. What's the thing that you recognize what's the most important thing? How hard it is, how proud they are, how fun it is, how hard they're working. And we want to help them. So we help them with money, we help them with advice. We now have these small business consultants, which you're going to hear from Ben about tomorrow, which I think is just a wonderful thing.

So that's the first thing, I'm proud of them, and they're part of that wonderful ecosystem. Plan a little bit. You don't automatically know what to do about a budget or a lease or where do you open your next restaurant or something like that, but plan a little bit. One of the great things about these is they learn from each other.

This is the fourth city you've done. I think four cities, and I don't know how many much more are you going to do. But hell, when I was driving, I was saying, 1,800 people? We should do this in every city in America. I mean, it's unbelievable. So it's motivating for us to see the dynamism in these companies.

BRIAN SOZZI: Before we let you go, I've followed your career for some time, Jamie. And now we're starting to get this next generation of leaders, not just in Wall Street, but just in my field, a lot of different fields. What's your advice or tips to them as they try to navigate this new level of uncertainty, as someone who has borne witness to some of the biggest financial events in the past 25 years?

JAMIE DIMON: Study everything. Learn, learn, learn. Don't get rigid in how you think. I've been reading five newspapers a day for like 30 years.

BRIAN SOZZI: At 5 AM?

JAMIE DIMON: Yeah. And be open minded. When you look at an issue, assess the whole issue. So I talk about China, they don't have enough food or energy. I talk to many people, they don't know China imports 8 million or 10 million barrels a day of oil. So people should understand the full situation, analyze the whole situation. And don't let yourself be weaponized because if that happens to press, it happens individuals.

Listen to what people have to say. But ask the second question, are they right or are they wrong? What determines whether it's right or wrong? And so all people should make sure they are thinking clearly. Have a decision process. I think the press is so important to educate the world.

One of the reasons I spend time with the press, you educate the world. And that's readers, but it's also you're educating influencers. And by that, I mean, the politicians, their staff, universities, all these people who help influence the course of society. So you've got to do your job well. That is part of what keeps America safe and sound.

BRIAN SOZZI: Well, Jamie, you've just educated millions of people around the world with this interview, and we thank you for the time. We really--

JAMIE DIMON: Thank you.

BRIAN SOZZI: We really appreciate it. JPMorgan Chase chairman and CEO Jamie Dimon, thanks for joining Yahoo Finance.