JPMorgan Chase (JPM) Chief Executive Officer (CEO) Jamie Dimon is warning investors that interest rates in the U.S. could reach 7% before inflation is tamed.
Dimon’s comments come after the U.S. Federal Reserve chose to leave its trendsetting Federal Funds Rate at its current range of 5.25% to 5.50% at its last policy meeting on September 20.
Markets have priced in only one more interest rate hike from the U.S. central bank, followed by several cuts to rates in 2024.
However, Dimon is warning that interest rates could go substantially higher over the next year as the Fed wrestles inflation back down to its 2% annualized target.
“Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I am not sure if the world is prepared for 7%,” said Dimon said in a media interview.
Dimon said 7% interest rates would be a “worst-case scenario” should stagflation emerge. Stagflation is when consumer prices rise while the economy stagnates.
While markets are now pricing in the possibility that interest rates in the U.S. will remain higher for longer, few if any economists and traders are planning for a Fed Funds Rate of 7%.
JPMorgan Chase’s stock has risen 37% over the last 12 months and currently trades at $146.45 U.S. per share.