Jamie Dimon Says the Fed May Hike Rates Much Higher Than Markets Expect

• The Federal Reserve may need to hike interest rates beyond the market’s expectations, JPMorgan CEO Jamie Dimon told Fox Business. 
• The Fed may have to lift the fed funds rates to 6%, while the consensus is for just above 5%. 
• “I don’t think there’s any harm done by waiting three to six months” to assess the impact of rate hikes, the CEO said. 

Stubbornly high Inflation may require the Federal Reserve to ratchet up interest rates by more than investors are currently anticipating, said JPMorgan CEO Jamie Dimon. 

Fed officials have suggested a terminal rate just above 5%, and markets are pricing in a level as high as 5.25%.

“My view is it may very well be six [percent],” Dimon said in an interview with Fox Business that aired Tuesday. Inflation isn’t likely to recede the way people expect but “it will definitely be coming down a bit.”  

Wage inflation may be sticky as lower-income Americans have been getting pay increases, he added. “And I don’t think in total that’s a bad thing. That’s a good thing. They haven’t had a pay raise in 20 years.” 

The Federal Reserve, led by Jerome Powell, raised interest rates seven times in 2022 from zero percent to a range of 4.25% to 4.5%. The Fed began to slow the pace of rate increases in December, to 50 basis points from 75 basis points. Investors widely expect the Fed to continue to downshift the size of rate increases this year.  

The Fed “should” eventually pause its rate hikes to assess the impact of pricier borrowing rates on the economy, Dimon said. 

“We were a little slow getting going. It caught up. I don’t think there’s any harm done by waiting three to six months to see what the full effect this is around the world,” he said. “I’m on the side where it may not be enough.” 

Inflation has been slowing since June, and stocks rallied on Friday after the December jobs report indicated the pace of wage growth, a top driver of inflation, had slowed to 0.3% compared with expectations of 0.4%. 

Consumer price index data for December is due on Thursday. Economists polled by Bloomberg expected an annual headline increase of 6.5%, easing from 7.1% in November. The Federal Open Market Committee’s next policy decision is due February 1.