JPMorgan Chairman Jamie Dimon Warns "US Interest Rates Could Rise to 8%"

Shareholders' Annual Letter Sent
"Fiscal Spending, Green Economy Cause Inflation"

Jamie Dimon, Chairman and CEO of JPMorgan, warned that U.S. interest rates could soar above 8% within the next few years.

In a 61-page annual letter sent to shareholders on the 8th (local time), Dimon stated, "Massive fiscal spending, the annual trillions of dollars in costs associated with the green economy, global rearmament, and the restructuring of global trade?all of these cause inflation." He also expressed concern that geopolitical risks such as the wars in Ukraine and the Middle East could amplify stress on the global economy.

He said he is preparing for scenarios where interest rates either fall to 2% or rise above 8%.

Dimon said, "In a scenario where the federal funds rate exceeds 6%, there is a high likelihood of significant stress on the banking system and companies with heavy borrowing," adding, "Interest rates have been extremely low for a long time, and it is difficult to know how many investors and companies are truly prepared for a high-interest-rate environment." He further analyzed, "If interest rates rise by 2 percentage points, the value of most financial assets essentially falls by 20%. Certain real estate assets, especially office real estate, could decline further due to recession and rising vacancy rates."

Currently, the U.S. benchmark interest rate is 5.25?5.5%, and the U.S. 10-year Treasury yield is 4.43%.

He also expressed skepticism about the U.S. economy achieving a soft landing. He said, "The market estimates the probability of a soft landing at 70?80%, but I believe the probability is much lower."

Earlier, Dimon had warned that the Federal Reserve's rate hikes starting in 2022 would hit the U.S. economy like a "hurricane." Although he has partially withdrawn his pessimism as the U.S. economy continues to show solid growth recently, Dimon still sees volatility risks remaining.

He expressed a critical stance on the Fed's tightening of capital regulations for large banks.

Dimon also emphasized that artificial intelligence (AI) will have a significant impact on society. He said, "I do not know the full effect or exact speed at which AI will transform our business, but I am completely confident that its impact will be astonishing," adding, "Its impact will bring changes as significant as the major technological inventions over the past few centuries, such as the printing press, steam engine, electricity, computers, and the internet."