In a wide-ranging interview on CNBC’s Squawk Box, JPMorgan Chase CEO Jamie Dimon questioned the efficacy and long-term consequences of the Fed’s approach to monetary policy.

He cited “quantitative tightening” as one of the many issues that the U.S. will grapple with in 2024 and 2025, adding, “I still question if we understand exactly how it works, I don’t think we do. How QE [quantitative easing] actually works. What’s the effect of negative — zero rates all this time.”

Quantitative tightening (QT) and quantitative easing are two sides of the same coin, so to speak.

QE is a form of monetary policy in which a central bank, such as the U.S. Federal Reserve, fuels economic growth by purchasing securities on the open market, according to Investopedia. This increases the money supply, giving banks more liquidity to make loans and investments, and helps reduce interest rates.

QT, also known as balance sheet normalization, is the opposite of that. It refers to policies that shrink monetary reserves by either selling government bonds or letting them mature and removing them from the government’s cash balances, thereby removing liquidity from the financial markets, as Investopedia explains.

An alternative to raising interest rates outright, QT provides another way to rein in inflation that invariably results in higher interest rates.

For the past year, the Federal Reserve Bank has been both raising interest rates and pulling money out of the economy, according to Forbes Advisor. Before that, the Fed was on a QE spree, with its balance sheet jumping from $4.2 trillion in February 2020 to almost $9 trillion by mid-March 2022.

So far, the QT strategy appears to have been working, as the rate of inflation has slowed, but what lies ahead is anyone’s guess. Various financial experts have predicted a mixed bag for 2024.

Dimon remains on the “cautious side” due to extensive “fiscal monetary stimulation” in recent years among other global issues.

Some of the factors he highlighted included the Ukraine-Russia war’s effect on oil, gas, food, and migration; the terrorist activity in Israel; the long-term impacts of quantitative tightening and easing; the downstream effects of zero rates; and the U.S. political climate.

“If I was the government, I would be preparing for what I’m going do about that, assuming things aren’t good,” Dimon said.

Barron’s pointed out that despite Dimon’s fluctuating predictions, “The U.S. economy has consistently defied expectations and proved extremely resilient over the past year or so.”