Jamie Dimon: US bank boss warns interest rates could rise to 8%

The head of one of the world’s biggest banks has warned that US interest rates could rise as high as 8%.

Jamie Dimon, head of JPMorgan Chase, said his bank had prepared for an interest rate hike due to “persistent inflationary pressures.”

Central banks around the world have been working to raise rates to try to curb rising prices.

But with price increases gradually slowing in some countries, central banks could start lowering interest rates.

In his annual letter to shareholders, Mr Dimon said the bank was prepared to accept a “very wide range” of rates, from 2% to 8% or more, potentially increased due to high public spending and the need to curb the rise in prices. .

Mr. Dimon’s comments come as U.S. interest rates are in a range of 5.25% to 5.5%, higher than they have been in more than 20 years.

By making borrowing more expensive, higher interest rates encourage saving and reduce borrowing for home purchases and business investments, thereby cooling the economy and easing the pressures that drive up prices.

The most widely held expectation is that interest rates will fall in 2024, with markets anticipating a two-quarter point rate cut from the US Federal Reserve this year.

“All of the following factors appear to be inflationary: ongoing fiscal spending, the remilitarization of the world, the restructuring of global trade, the capital needs of the new green economy, and possibly higher energy costs,” Mr. Dimon wrote.

The US Federal Reserve will make its next decision on interest rate developments at the end of the month.

It is expected to keep rates at the current level, with the first cut possibly taking place in June. The European Central Bank is also expected to make its first cut in June.

On Tuesday, however, some analysts wondered whether rate cuts were planned for the summer in the United States.

The latest US inflation figures are due to be released on Wednesday, with the CPI expected to rise to 3.4% year-on-year, up from 3.2% in February, perhaps making it harder to justify rate cuts. rate.

In a speech at Stanford University in early April, Federal Reserve Chairman Jay Powell said, “If the economy generally performs as we expect, most participants in the Federal Open Market Committee consider that it would probably be appropriate to start lowering the policy rate. at some point this year. »

Mr. Dimon has been chief executive of JPMorgan Chase since late 2005. A year later, he also became chairman and CEO of the bank. He is the longest-serving chief executive of a major investment bank.

In his letter to shareholders, he also said he saw the United States as being at a “pivotal moment” amid global uncertainty.