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Jamie Dimon Predicts Interest Rates Above 5% Due to Underlying Inflation

JPMorgan Chase CEO, Jamie Dimon, believes that interest rates could go higher than what the Federal Reserve currently projects due to stubbornly elevated inflation.

Jamie Dimon
Jamie Dimon

He said, "I think rates are probably going to go higher than 5% ... because I think there's a lot of underlying inflation, which won't go away so quickly," on CNBC's "Squawk Box" from the World Economic Forum in Davos, Switzerland.

Fed Raises Benchmark Interest Rate to Combat Inflation

To combat soaring prices, the Federal Reserve has raised its benchmark interest rate to a targeted range between 4.25% and 4.5%, the highest level in 15 years. At its December meeting, the anticipated "terminal rate," or the point where officials expect to end the rate hikes, was set at 5.1%.

JPMorgan build
JPMorgan build

Dimon Attributes Recent Inflation Decrease to Temporary Factors

Dimon said the recent decrease in inflation is due to temporary factors such as a pullback in oil prices and a slowdown in China due to the Covid pandemic. He added, "I think oil gas prices probably go up the next ten years... China isn't going to be deflationary anymore."

Rate Hikes Fuel Recession Worries

The series of aggressive rate hikes have fueled worries about a recession in the U.S. However, central bankers still feel they have leeway to raise rates as the labor market, and the consumer remain strong. The JPMorgan chief said if the U.S. suffers a mild recession, interest rates will rise to 6%. He added that it's hard for anyone to predict economic downturns.