Hike rates

Jamie Dimon’s ‘Gut’ Says Fed Will Need to Hike Rates Over 4% to 4.5%

  • Jamie Dimon said the Fed’s benchmark rate will likely need to rise above 4% to 4.5%, according to Bloomberg.
  • The Fed’s benchmark rate is now between 3% and 3.25%, after five rate hikes this year so far.
  • JPMorgan’s CEO said he thinks the US economy is unlikely to experience a soft landing.

Jamie Dimon, CEO of JPMorgan, said the US Federal Reserve will likely have to raise its benchmark interest rate above a widely expected range, Bloomberg reported Thursday.

Speaking at an industry conference in Washington, Dimon said his “gut” told him the Fed’s benchmark rate will have to rise above the 4% to 4.5% expected by many economists, to contain inflation.

After starting the year near zero, the central bank’s benchmark rate is now in the 3% to 3.25% range, after five rate hikes. Rate hikes have seen bigger increases at a faster pace over the months.

The Fed is rushing to stifle inflation, which hit a 40-year high of 8.2% in the year to September, according to the Bureau of Labor Statistics.

Higher interest rates make borrowing for everything from mortgages to credit cards more expensive. And that encourages people to save rather than spend, which, in theory, helps lower prices.

But he it takes time for the effects to be felt and the risk is that the central bank raises rates to the point where the economy slows down and even tips into recession, as demand contracts.

Dimon also does not foresee an optimistic outlook for the US economy. Monday he said CNBC, the American economy is expected to face a recession over the next six to nine months. He reiterated that view again on Thursday.

“I don’t know if it could be a soft landing — I don’t think so, but it could,” Dimon said, according to Bloomberg. “In a tough recession, you might expect the market to drop another 20% to 30%.”