In a recent report, the chief executive officer of JPMorgan Chase & Co., Jamie Dimon, reportedly warned that the global financial markets are not ready to accommodate the impact that would ensue if the United States raised its interest rates to 7%.
According to the report, Jamie Dimon pointed out during a JPMorgan investors conference recently held in Mumbai that the global financial markets can plunge into sudden turbulence if the US Federal Reserve ( Feds) turns up the interest rate to 7% during stagflation. Prior to recent developments, reports showed that Dimon was a prominent advocate for an increment in interest rates to combat inflation.
However, reports showed that the CEO is having a change of mind on the topic as he claimed that a transition of interest rates from 5% to 7% would have a bolder impact on the global economy if compared with the aftermath when it was increased from 3% to 5%.
In addition, Financial analysts nursed the opinion that the Feds was gradually reaching the end of its inflation combating cycle when it increased the interest rates from 5% to 5.5%, which was the highest level in decades. Meanwhile, regulators think that in order to cut down and prevent further inflation, the rate hikes need to be maintained for an extended period.
Gobal Financial Markets Not Ready For Rates Increase
On the contrary, the financial futures markets expects the rates to be reduced significantly as this year runs out and 2024 begins. The JPMorgan CEO raised a concern that should the Feds attempt raising the interest rates to a hallmark of 7%, both companies and consumers would be hugely affected. He added that the increase may be the last straw that would plunge the United States economy into a recession. Meanwhile, financial experts already predicted that the US recession status may hit 60% in 12 months.
In addition, Dimon highlighted that a rate hike from 0% to 2% may have a not-so-glaring impact. However, he considered a jump from 0% to 5% a massive pump, which took many people and businesses by surprise, even though it was a possibility. But the CEO said he still doubts if the world economic markets are ready for the impact of 7% interest rates on the US state’s Federal Reserve.
Meanwhile, the reports showed that in alignment with the public expectation, the Feds continued to uphold its standard interest rates earlier this month. However, some disputes have been reported among the administrative board of the Federal Reserve concerning their following action on interest rates.
Experts Say The Future Looks Glummy For US Economy
According to the report, about 12 of the 19 executives want another raise in rates before this year ends, while the other wants the organization to continue upholding its rates at 6%. Meanwhile, the Chairman of the Federal Reserve, Jerome Powell, has reportedly been dedicated to deciding the future of interest rates using real-time data.
Commenting on the latest development, Peter Schiff, a prominent economist, stated that the future is bleak for the United States Dollar and the general economy as he linked the currency economy inflation pressure to the financial meltdown that occurred in 2008. The economist added that the primary facilitators of the worsening inflation rates are the quantitative easing policies and the fiscal reaction to the pandemic.
Schiff Highlights Increasing Fiscal Instability
In addition, he also highlighted the increasing fiscal instability in the US, referencing the whopping $2 trillion drawdown on the country’s annual budget and a gradually growing national debt. Furthermore, Schiff thinks that the current predicament in which the country finds itself could get worse, leading to the scariest inflation case, more significant than what we have all experienced before.
Meanwhile, prior to this report, an earlier report revealed that another prominent economist had once stated that the growing concerns about the imbalance of the USD could lead to a massive economic crisis that would send the United States and the global economy into a ditch.
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