JPMorgan chief says US Federal Reserve may raise rates to 8% or higher

JPMorgan Chase chief Jamie Dimon warned that US interest rates could surge to more than 8% in the coming years as record US debt and ongoing international conflicts complicate the fight to tamp down inflation, Report informs referring to The New York Post.

“Huge fiscal spending, the trillions needed each year for the green economy, the remilitarization of the world and the restructuring of global trade — all are inflationary,” Dimon wrote in his annual letter to JPMorgan shareholders released Monday.

Though Dimon told investors that he expects the Federal Reserve to dodge a so-called “soft landing” — by cooling down inflation without setting off a recession — he is also prepared for a more concerning outcome.

“These markets seem to be pricing in a 70% to 80% chance of a soft landing,” Dimon wrote in his letter earlier reported on by The Wall Street Journal. “I believe the odds are a lot lower than that.”

“Economically, the worst-case scenario would be stagflation,” which would see the economy staying stagnant and “would not only come with higher interest rates but also with higher credit losses, lower business volumes and more difficult markets,” he added.

Still, Dimon said JPMorgan — the biggest bank in America by asset size — “would continue to perform at least okay,” and pointed to the Wall Street giant’s record of nearly $50 billion in profits last year.

Despite a sharp rise in interest rates in recent years, the Fed hasn’t even been able to get inflation under 3%.

In a turnaround from policymakers’ earlier statements that there would be three interest-rate cuts this year, Fed Governor Michelle Bowman said on Friday that interest rates may even move higher.

“While it is not my baseline outlook, I continue to see the risk that at a future meeting, we may need to increase the policy rate further should progress on inflation stall or even reverse,” Bowman said in prepared remarks to a group of Fed watchers in New York on Friday.

“Reducing our policy rate too soon or too quickly could result in a rebound in inflation, requiring further future policy rate increases to return inflation to 2% over the longer run,” she added, per CNBC.