JP Morgan Chase CEO says Fed rate hikes might need to exceed expectations

JP Morgan Chase CEO Jamie Dimon said the Federal Reserve may need to raise interest rates this year beyond what it is expected to get inflation under control. 

Dimon told Maria Bartiromo in an interview on her Fox Business show, “Mornings with Maria,” on Monday that he supports the Fed slowing down its pace of rate hikes at this point and believes the hikes should be paused once interest rates reach 5 percent, as the world expects. He noted that the increases throughout 2022 were “the fastest we’ve ever seen.” 

“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. 

He noted, however, that the rate hikes may ultimately need to continue.

The Fed raised interest rates by 0.5 percentage points to a range of 4.25 to 4.5 percent last month, a more modest increase than the hikes that preceded it as inflation showed signs of alleviating. The agency had raised rates by 0.75 points four consecutive times earlier last year as inflation soared to its highest level in decades. 

Fed Chairman Jerome Powell, who has said he is willing to take the necessary steps to get inflation back under control even if it causes an economic downturn, said at a press conference last month announcing the 0.5-point increase that the Fed has more work to do. 

The annual inflation rate dropped from its peak of 9.1 percent in June to 7.1 in November, but the Fed’s target is to get inflation back down to 2 percent. 

Some economic analysts have expressed concern that the increases could cause a recession, but the economy has shown some resiliency in continuing to add jobs over the months. 

Dimon said the Fed may decide in the fourth quarter of 2023 that it needs to raise rates a little more if the steps it took earlier in the year were not enough. 

He said there is a 50-50 chance the Fed will have to hike rates up to 6 percent versus the expected 5 percent.

— Updated at 12:42 p.m.