JP Morgan’s Chase boss says that increasing interest rates and inflation could have a devastating impact on the global economy.
Jamie Dimon, CEO of JP Morgan Chase, told the Times of India: “Warren Buffett says you find out who is swimming naked when the tide goes out.
“That will be the tide going out.”
Due to the inflation cost, interest is the highest it’s ever been, even after the Federal Reserve warned it would do whatever to bring the inflation down.
Americans also feel the impact of the increasing interest rates as the average monthly mortgage payment has skyrocketed from $1191 in Jan 2020 to 2,161, according to the Mortgage Brokers Association.
But, despite the rise in interest, economists are also expecting rates to peak at 5.75 to six percent. However, inflation has still risen due to the ongoing war in Ukraine.
Econonoy experts already say that there is a 55 percent chance the US enters a recession next year, but hopes for a “soft landing” for the economy would disappear in the face of a seven pecent bank rate, Dimon warned.
Dimon said: “Going from zero to two percent was almost no increase.
“Going from zero to 5 percent caught some people off guard, but no one would have taken 5 percent out of the realm of possibility. I am not sure if the world is prepared for seven percent.
Rising mortgage bills, tracked by the increase in house prices, jumped from $322,000 to $479,000 in the two years
And although the prices have slumped back down to $416,000, analysts are warning of a “mortgage timebomb” which leaves millions trapped in homes they can no longer afford.
“The world is unprepared for a seven percent Federal Reserve funds rate,” Charlie Jamieson of Jamieson Coote Bonds told Bloomberg Television on Tuesday.
“At that level, we would expect that we would have a deflationary asset unwind, it would burst a lot of asset bubbles, it just simply wouldn’t be sustainable.”
Dimon, also warned that the war in Ukraine could ultimately put the he US economy in temporary problems with inflation.
“I think the geopolitical situation is the thing that most concerns me, and we don’t know the effect of that in the economy,’ he told CNBC.
“Far more important to me is the Ukraine war, oil, gas, food migration — it’s affecting all global relationships — very importantly, the one between America and China.
“I’m an American patriot, so governments are going to set foreign policy, not JPMorgan, but I think Americans should stop thinking that China is a 10-foot giant.”
He stated the Russian invasion of Ukraine has put every country in a nervous state about national security and acces to vital imports.
