Jamie Dimon on interest rates: ‘I’m not sure the world is ready for 7%’


Published: September 26, 2023 2:59 am ET

A week after the Federal Reserve held interest rates steady between 5.25% and 5.5% and greenlit one last rate hike for this economic cycle, JPMorgan JPM Chairman and CEO Jamie Dimon spoke to The Times of India .

That makes Dimon significantly more hawkish than his own economists — who expect just one more rate hike — or the market in general.

Whereas…

That’s JP Morgan

JPM

A week after the Federal Reserve held interest rates steady between 5.25% and 5.5% and greenlit one last rate hike for this economic cycle, Chairman and CEO Jamie Dimon spoke to The Times of India.

That makes Dimon significantly more hawkish than his own economists — who expect just one more rate hike — or the market in general.

While financial markets don’t necessarily envision a world with 7% interest rates, they are adjusting to the Fed’s longer-term higher stance.

The yield on 10-year Treasury BX:TMUBMUSD10Y rose 10 basis points on Monday to the highest level in nearly 16 years. The yield on the 30-year BX:TMUBMUSD30Y also rose, reaching its highest level in more than 12 years. The S&P 500 SPX managed to advance on Monday despite rising long yields, but the index is still down 5% from its high in late July.

In the interview, Dimon said the worst-case scenario would be 7% interest rates with stagflation. “If they have lower volumes and higher rates, there will be stress in the system. We urge our customers to be prepared for that kind of stress,” he said.

However, one concern that Dimon does not share is the combination of social media and digital banking. “Social media and online banking were there during the great financial crisis. Only a few banks had problems – Silicon Valley Bank, First Republic Bank and Signature. Other banks had no problems,” he said. “Everyone knew the problem of interest rate risk. “I don’t think we want a system where no bank ever fails.”

Dimon was speaking to the newspaper after JPMorgan decided to add India to its emerging market government bond index. “It is great for India to be a part of the index because it has other implications and implications regarding transparency and the development of the country. Therefore, this will help equity inflows into India,” he said.

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