Investing.com — The world may not be prepared for the U.S. Federal Reserve to raise interest rates to 7%, JPMorgan Chase (NYSE:) Chief Executive Officer Jamie Dimon has warned.
In an interview with the Times of India, Dimon said that a period of “lower volumes and higher rates” will put stress on the global financial system, adding that JPMorgan is urging its clients to ready themselves for this type of turbulence.
“Warren Buffett says you find out who is swimming naked when the tide goes out,” Dimon noted. If the Fed hikes rates to 7% from its current range of 5.25% to 5.50% and the economy slips into stagflation — a period of high inflation, low growth and increased unemployment — “that will be the tide going out,” he said.
Dimon’s comments come after Fed policymakers suggested that borrowing costs may need to stay elevated for longer to help combat stubborn inflationary pressures.
At its latest policy meeting earlier this month, the central bank decided to leave its benchmark rate unchanged, a move that was widely anticipated by economists. But new quarterly projections showed that 12 of 19 officials backed another rate hike later this year. The Fed is due to gather again in November and December.
However, money markets are still largely pricing in potential rate cuts in 2024, as hopes remain that the Fed will manage to simultaneously quell price gains and avoid a broader economic meltdown.
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