Dimon Advocates 6% Interest Rate, Powell Reaffirms Tightening Policy

[Asia Economy New York=Special Correspondent Joselgina] Jamie Dimon, chairman of JP Morgan Chase, known as the "Emperor of Wall Street," has argued that the U.S. central bank, the Federal Reserve (Fed), should raise the benchmark interest rate to the 6% range. Jerome Powell, chairman of the Fed, also reaffirmed his tightening stance, stating that "short-term unpopular rate hikes are inevitable" to stabilize soaring inflation.

Jamie Dimon, Chairman of JPMorgan Chase Photo by EPA Yonhap News

In an interview with Fox Business on the 10th (local time), Chairman Dimon said, "I'm not sure if a 5% rate is enough to slow inflation," adding, "In my view, there is a very high possibility that the terminal rate will rise to 6%." The 6% range far exceeds the Fed's median year-end rate forecast of 5.1% presented in the December dot plot, as well as the projections of major investment banks.

He expressed concern about entrenched high inflation, saying, "Inflation will not fall more than people expect. It will certainly fall a little." Accordingly, there is speculation that the Fed may pause rate hikes in the mid-5% range around mid-year, then resume raising rates again in the fourth quarter after confirming a slow easing of inflation.

This outlook contrasts with recent criticisms from some quarters that the Fed's excessive rate hikes could lead to an unnecessary recession, known as 'overshooting.' Over the past year, the Fed has raised the U.S. benchmark interest rate seven times, bringing it to 4.25-4.5%, the highest level in 15 years.

Jerome Powell, Chairman of the Federal Reserve (Fed)
[Photo by Reuters]

Chairman Powell also confirmed his tightening resolve. At a symposium hosted by the Swedish central bank that day, he stated, "Price stability is the foundation of a healthy economy and will provide countless benefits to the public over time." Despite growing concerns about a recession, this reaffirmed that the Fed still prioritizes price stability above all else.

He said that to restore price stability when inflation is high, "short-term unpopular measures such as rate hikes that slow the economy may be required." He also emphasized political independence again, saying, "Monetary policy independence has the advantage of protecting monetary policy from short-term political considerations."

On the same day, Fed Governor Michelle Bowman noted, "There are positive signs that some inflation indicators have been declining in recent months," but added, "There is more work to do, so more rate hikes will follow." She also mentioned that the Fed's terminal rate and the magnitude of rate hikes depend on future inflation and economic outlook.

The U.S. Consumer Price Index (CPI) for December, which the Fed is closely watching, will be released on the 12th. The current Wall Street consensus expects a 6.6% year-over-year increase, down from 7.1% the previous month. Accordingly, the market anticipates that regardless of the terminal rate level, the Fed will take additional steps to slow the pace at the Federal Open Market Committee (FOMC) meeting scheduled for January 31 to February 1. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market currently reflects a 76.7% probability of a 0.25 percentage point rate hike, a significant increase from around 67% a week ago.

This content was produced with the assistance of AI translation services.