Jamie Dimon believes that if the US ends up in recession, the Fed could end up raising interest rates by as much as 6%.
During his latest interview with CNBC, JPMorgan chief Jamie Dimon shared his views on the current economic outlook, adding that he expects interest rates to rise much higher than the Fed’s current projection.
Dimon believes that with inflation remaining stubbornly high, the Fed could be forced to raise rates beyond 5%. Speaking from the World Economic Forum from Davos, Switzerland on Thursday, Dimon told CNBC:
“In fact, I think rates will probably go up more than 5%…because I think there’s a lot of underlying inflation, it’s not going to go away as quickly.”
To fight persistent inflation, the Federal Reserve has already raised benchmark interest rates to 4.25-4.5%. These are the highest rates in the last 15 years. During the December meeting, the “terminal rate” at which the Fed is likely to end any further hikes was supposed to be 5.1%.
During the month of December 2022, the consumer price index (CPI) increased by 6.5% compared to the previous year. However, this was the smallest annual increase in more than a year since October 2021. But Dimon believes the recent decline in inflation is due to temporary factors such as the pandemic-induced slowdown in China and falling prices. of the oil. Commenting further, he aggregate:
“We had the benefit of the slowdown in China, the benefit of oil prices falling a bit. I think oil and gas prices will probably go up in the next 10 years… China will no longer be deflationary.”
However, aggressive rate hikes have already fueled concerns about an impending US recession. But with the job market and consumer market remaining strong, the Fed still feels the need to raise interest rates.
What happens if the United States goes into recession?
Speaking on the subject, the JPMorgan chief claimed that if the US were to go into recession, interest rates could rise to 6%. However, he points out that it would be difficult for anyone to predict economic downturns.
“I know there will be recessions, ups and downs. I don’t really spend that much time worrying about it. I am concerned that poor public policy hurts American growth,” she added.
While Jamie Dimon shared his views on the Fed’s action, he did not hesitate to lash out at Bitcoin once again. Dimon, who has been an ardent critic of Bitcoin and cryptocurrencies in the past, indicated that Bitcoin itself is an “exaggerated fraud”.
JPMorgan has been doing well and last week the bank reported its fourth-quarter earnings and revenue while beating Street’s expectations. “Our business lines performed well in the quarter and we continue to see momentum in our strategic focus areas,” Dimon said.
On Wednesday, January 18, JPMorgan (NYSE: JPM) shares came under selling pressure, falling 3% to end trading at $136.
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Bhushan is a FinTech enthusiast and has a good knack for understanding financial markets. His interest in economics and finance draws his attention to the new emerging markets of Blockchain Technology and Cryptocurrencies. He is continuously in a learning process and stays motivated by sharing the knowledge he has acquired. In his spare time, he reads thrillers and sometimes explores his culinary skills.
