The head of JPMorgan Chase, Jamie Dimon, said that his company is ready for interest rates to go up because of “persistent inflationary pressures.” Another big bank boss said that interest rates in the US could go up to 8%. Rates have been going up at central banks all over the world to try to slow down price increases. But since inflation in the US is slowly going down, most people think that the Federal Reserve will cut rates this year.
It is expected that rates will go down by two quarter points in 2024. In his yearly letter to shareholders, Mr. Dimon said that the bank was ready for a “very broad range” of rates, from 2% to 8% or even higher. He said that rates could go up because the government was spending a lot of money and prices needed to stop going up too much.
Interest rates in the US are higher than they’ve been in more than 20 years, at between 5.25% and 5.5%. This is when Mr. Dimon spoke. Higher interest rates make it more expensive to borrow money, which makes people save more and borrow less for things like home purchases and business investments. This slows down the economy and eases the stresses that are driving up prices.
“All of the following factors appear to be inflationary: ongoing fiscal spending, remilitarization of the world, restructuring of global trade, capital needs of the new green economy, and possibly higher energy costs,” he wrote in this year’s letter.
At the end of the month, the US Federal Reserve will decide again which way interest rates will move. Rates are expected to stay where they are for now, with the first possible cut coming in June. In June, the European Central Bank is also likely to make its first cut. Some experts, though, asked on Tuesday if rate cuts are planned for the US this summer.
So far, higher interest rates on loans have not slowed down the US economy as much as people thought they would. Some industries, like housing, have slowed down a lot, but the unemployment rate is still below 4%, and businesses are still adding jobs at an incredibly fast rate, thanks to government and customer spending.
The most up-to-date US inflation data is coming out on Wednesday. The CPI measure of inflation is expected to rise to 3.4% year-over-year, up from 3.2% in February. This could make it harder to justify cutting interest rates. Federal Reserve chair Jay Powell said at the start of April at Stanford University, “If the economy evolves broadly as we expect, most Federal Open Market Committee participants see it as likely to be appropriate to begin lowering the policy rate at some point this year.”
Since the end of 2005, Mr. Dimon has been the CEO of JPMorgan Chase. After a year, he was also named head and president of the bank. He has been the head of a big investment bank the longest. In his message to shareholders, he also said that he thinks the US is at a “pivotal moment” in a time of uncertainty around the world.