Warned by Jamie Dimon CEO of JP Morgan Chase on interest rates going up quite a bit further as policymakers face the prospects of elevated inflation and slow growth. Dimon is raising the specter of the war on inflation getting worse before it gets better.
Though Fed officials indicated that a raise in interest rates are near the end of their rate-hiking cycle. As per Jamie Dimon of JPMorgan interest rate will rise. Dimon warned that if the Fed has to keep raising interest rates to cool inflation, it will be painful.
CEO of JP Morgan warns interest rate will rise
In fact, as per a report, Dimon said Fed’s key borrowing rate could rise significantly from its current targeted range of 5.25%-5.5%. He said that when the Fed raise interest rate from near zero to 2%, it was “almost no move,” while the increase from there to the current range merely “caught some people off guard.”
“I am not sure if the world is prepared for 7%,” he said, according to a transcript of the interview. “I ask people in business, ‘Are you prepared for something like 7%?’ The worst case is 7% with stagflation. If they are going to have lower volumes and higher rates, there will be stress in the system. We urge our clients to be prepared for that kind of stress.”
Fed raise interest rate will continue
To emphasize the point of increase in Fed borrowing rate, Dimon referenced Warren Buffett’s much-cited quote, “Only when the tide goes out do you discover who’s been swimming naked.”
Inflation numbers are signaling the Fed will keep interest rates higher for longer, says SEI’s Jim Smigiel
“That will be the tide going out,” he said about the rate surge. “These 200 will be more painful than the 3% to 5%” move.
The comments come less than a week after Fed officials, in their quarterly economic update, indicated that they could approve another quarter percentage point increase in interest rate by the end of the year before beginning to cut a few times in 2024.
Jerome Powell on rise in interest rate
However, that’s predicated on the data, continuing to cooperate. Fed Chair Jerome Powell said the central bank won’t hesitate to raise interest rates, or at least keep them at elevated levels, if it doesn’t feel like inflation is on a sustained trajectory lower, a higher-for-longer reality with which markets are grappling.
“I would be cautious,” said Dimon. “We have to deal with all these serious issues over time, and your deficits can’t continue forever. So rates may go up more. But I hope and pray there is a soft landing.”
Treasury yields have been on the rise since last week’s Fed meeting, with the 10-year note hovering around 16-year highs.
Opinions on Fed interest rate inflation
Wolfe Research cautioned Tuesday that the benchmark note could hit 5% before the end of the year, from its current level near 4.5%.
At the same time, Fed researchers, in a white paper released Monday, noted the high level of inflation uncertainty, which they said “may be acting as a headwind to U.S. growth and pose challenges for monetary policy.” The paper said that such uncertainty can have an impact on industrial production, consumption and investment.
