- Written by Chris Newlands
- BBC News business reporter
The boss of the world's biggest bank has warned that US interest rates could rise to 8%.
JPMorgan Chase chief Jamie Dimon said the bank was bracing for a spike in interest rates due to “sustained inflationary pressures.”
Central banks around the world are busy raising interest rates to curb rising prices.
But as price increases gradually slow in some countries, central banks may start lowering interest rates.
In his annual letter to shareholders, Mr. Dimon said the bank was prepared to accept a “very wide range” of interest rates, from 2% to 8% or more, due to soaring government spending and the need to contain price increases. He said interest rates could be raised. .
Dimon's comments come as U.S. interest rates are hovering in the 5.25% to 5.5% range, higher than they have been in more than 20 years.
Rising interest rates make borrowing more expensive, encouraging savings and reducing borrowing for home purchases and business investments, cooling the economy and easing upward pressure on prices.
There is an overwhelming expectation that interest rates will fall in 2024, and the market is pricing in two 0.5 point rate cuts by the US Federal Reserve this year.
“The following factors are all likely to be inflationary: ongoing government spending, global remilitarization, the restructuring of global trade, the capital needs of the new green economy, and possibly rising energy costs,” Dimon said. ” he said.
The Federal Reserve is expected to make its next decision on how interest rates will move later this month.
Interest rates are expected to remain at current levels, with a possible first rate cut in June. The European Central Bank is also expected to make its first rate cut in June.
But some analysts on Tuesday questioned whether a U.S. summer rate cut is in store.
The latest U.S. inflation numbers are expected to be released on Wednesday, with CPI inflation expected to be 3.4% year-on-year, up from 3.2% in February, likely making it harder to justify a rate cut. Dew.
In a speech at Stanford University in early April, Federal Reserve Chairman Jay Powell said, “If the economy broadly develops as we expect, most participants on the Federal Open Market Committee will “We believe it is likely appropriate to begin reducing policy rates.” At some point this year. ”
Mr. Dimon has been chief executive officer of JPMorgan Chase since late 2005, and a year later became chairman and president of the bank. He is the longest-serving chief executive officer of a major investment bank.
In his letter to shareholders, he also said he sees the U.S. at a “pivotal time” in the midst of global uncertainty.