Jamie Dimon, the head of JPMorgan Chase, has warned that US interest rates could rise to 8% due to persistent inflationary pressures. Central banks worldwide have been raising rates to dampen rising prices, but with US inflation gradually easing, the expectation is for the Federal Reserve to cut rates this year. Markets are pricing in two quarter-point rate cuts in 2024. Dimon said the bank was ready for a "very broad range" of rates, from 2% to 8% or even higher, potentially pushed up because of high government spending and the need to curb price rises.
US interest rates currently rest in the range of 5.25% to 5.5%, higher than they have been for more than 20 years. By making borrowing more expensive, higher interest rates encourage saving and reduce borrowing for home purchases and business investments, cooling the economy and easing the pressures pushing up prices.
The US Federal Reserve will make its next decision on which way interest rates will move at the end of the month, with the first cut potentially coming in June. The European Central Bank is also expected to make its first cut in June.
However, some analysts questioned whether rate cuts lie in store for the summer in the US. To date, higher borrowing costs have not been the big drag on the US economy that they were expected to be. The latest US inflation figures are due to be published on Wednesday, with the CPI measure of inflation expected to rise to 3.4% year-on-year, up from 3.2% in February.