Dimon Warns World Not Prepared for Fed Rate of 7%

    Bloomberg News reports that it is pretty likely that the world still needs to prepare for a worst-case scenario in which the benchmark interest rate is possibly reaching 7% coupled with stagflation. The chief executive officer of JP Morgan Chase & Co., Jamie Dimon revealed the same. He said that the system will become stressed if there are lower volumes coupled with higher rates.

    What Does Experts Say?

    Experts like Warren Buffet have said that it is possible to know who is swimming naked when there is no tide or the tide goes out. As such, Dimon said that the scenario will be like the tide going out. He also said that to fight inflation, it is necessary that the rates will hike further. He cited that if compared, the case in which a 5% and 7% difference is more painful as compared to a hike rise between 3% and 5%.

    What Has Been the Consensus View?

    Damie’s comments come when the consensus is that the Fed is near the end of the tightening cycle following a 5.25% hike. This caused the benchmark to 5.5%. This is the highest ever level in the last 22 years. Yet, policymakers in the United States have signaled that it is necessary for rates to remain higher at this time to address inflation for a longer period. This need comes at a time, although it is seen that the money markets are pricing in the cuts from the coming year.

    What Happens When the Key Climbs 7%?

    Bloomberg News reports that if the key rate climbs 7%, there would be serious implications for consumers and business entities in the United States. The economists have already kept the probability of a recession in the United States over the next year at 60%.

    How Else Would it Affect the Scenario at a 7% Rate?

    A rate of 7% would likely douse the optimistic sentiment of late among the Fed officials about their capacity to engineer a soft landing in the economic setup. This is especially true when the rate of unemployment remains at a low 3.8%, coupled with the fact that there are also signs of easing out.

    The Fed is anticipated to move the target range held by them at the beginning of the current month. However, the fresh quarterly projections manifested 12 out of the 19 officials, which favored another hike this year.

    US inflation continues to be above the Fed’s 2% annual target rate. On the other hand, the prices were increasing in August in the face of the higher energy cost. There is a measure of stripping out energy and food, which quickened, fostering for the first time since February amidst a robust economy.

    RELATED ARTICLES

    When was Studio Ghibli founded

    When Was Studio Ghibli Founded: Japan’s Iconic Animation Legacy

    Studio Ghibli is a popular Japanese animation studio, known by many for its stunning movies,...
    US-Ukraine talks

    US-Ukraine Talks: Zelensky Seeks Meaningful Outcomes Amid War

    Ukrainian President Volodymyr Zelensky hopes the subsequent talks between Ukraine and the United States will...
    OTT platforms

    OTT Platforms: Reviving Local Languages, Culture, and Heritage in India

    OTT systems have revolutionized content material intake in India, presenting audiences with admission to numerous...
    mental health

    Mental Health Awareness In India: Breaking The Stigma In 2025

    One of the aspects of our overall well-being is mental health, and it should not...
    women safety in India

    Women Safety in India: Key policy changes and ongoing challenges

    For an extended period, Indian society has maintained women's safety as both domestic and international...
    New Education Policy 2024

    New Education Policy 2024: Learning is Being Transformed

    Education in India has long been dependent on traditional methodologies that emphasize rote learning and...
    When was Studio Ghibli founded

    When Was Studio Ghibli Founded: Japan’s Iconic Animation Legacy

    Studio Ghibli is a popular Japanese animation studio, known by many for its stunning movies,...
    Wheon com

    Wheon com: Your Gateway to Elevated Online Presence with an Effective Guest Post

    Ever feel like your website's voice is lost in the digital crowd? Are you struggling...
    wellhealthorganic.com : remove dark spots on face tang

    WellHealthOrganic.com : remove dark spots on face tang – Natural Remedies for Brighter Skin

    Wellhealthorganic.com : remove dark spots on face tang – Let's talk about those stubborn dark...
    kutty movies.com

    Kutty Movies.com: Your Gateway to Heartfelt Cinema

    Kutty movies.com feels like finding a secret map to a whole world of films, but...
    brand strategy

    Brand Strategy: Your Ultimate Guide To Success

    Brand strategy is the heart of your business, but too many miss the mark, wandering...