JPMorgan CEO expects up to seven rate hikes in 2022

Jamie Dimon sees more rate hikes than we think for the U.S. economy this year.

JPMorgan (JPM) CEO predicted on Friday that rising inflation could cause the Federal Reserve to raise short-term borrowing costs as many as six or seven times, which would double his previous bet that the currently expected increases of three to four are likely a low estimate what investors can expect.

“My view is that there is a pretty good chance that there will be more than four – there could be six or seven,” Dimon said during a post-earnings conference call Friday morning. “I grew up in a world where Paul Volcker raised his interest rates by 200 basis points on a Saturday night.”

A spokesman for JPMorgan said Dimon discussed “the possibilities over time, not probabilities,” in his remarks, and it really depends on the value of such increases.

The Fed has taken a sharp, hawkish turn on monetary policy in recent months amid rising inflation and a faster-than-expected recovery in the labor market to tip towards a faster withdrawal of stimulus from the pandemic. The focal point has led large Fed observers – such as Goldman Sachs and Deutsche Bank among them – to revise their outlook in the expectation that short-term interest rates will be higher by the end of 2022 than where they are now.

Dimon has been among this cohort and has previously expressed his view that the US economy could absorb more than four rate hikes this year.

“This whole notion that it will somehow be sweet and gentle and no one will ever be surprised, I think is a mistake, but that does not mean we do not want growth,” the country’s top banker said during the call. after JPMorgan’s fourth quarter earnings announcement.

JPMorgan CEO expects up to seven rate hikes in 2022

JP Morgan CEO Jamie Dimon watches during the inauguration of the new French headquarters of the US JP Morgan Bank on June 29, 2021 in Paris. The US bank JP Morgan’s new trading floor is the latest example of how Brexit has changed Europe’s financial landscape since January. (Photo by Michel Euler / POOL / AFP) (Photo by MICHEL EULER / POOL / AFP via Getty Images)

“At this point, it’s up to the Fed to thread the needle: slow the growth of inflation without stopping growth,” he said, adding that he has “a lot of confidence in Jerome Powell.”

Hennessy Large Cap Financial Fund Portfolio Manager David Ellison told Yahoo Finance Live that if Dimon’s estimate is correct, assuming increases of 25 basis points each, it would mean short-term interest rates could be up 2% by the end of the year.

“If it’s that much, the market will have a lot of problems across the board just because the last time we did this, it was beaten up,” said Ellison, who criticized Dimon’s remarks about rate hikes and called it “an irresponsible” comment “on due to the impact that JPMorgan CEO’s comments may have on the markets.

Earnings results

Shares of JPMorgan Chase & Co fell as much as 5% in early trading on Friday after the company’s reporting earnings in the fourth quarter, which reflected a 14% decline in profits during the period due to a slowdown in trading activity that beat analyst estimates narrowly thanks to strong results in its investment banking unit. Specifically, the bank saw trading revenue fall by 13%, while investment banking revenue increased 28%, amplified by a blockbuster year for traders. In total, JPMorgan made a profit of $ 10.4 billion, or $ 3.33 per share, in the period ending December 31st.

“We broke the piñata today in terms of earnings, and the operating word is in line,” Ellison told Yahoo Finance Live. “I think that’s why stocks are trading down.”

JPMorgan’s core business, lending growth, increased by 6%, strengthened by economic recovery and net interest income from lending, while investments in government securities increased by 3%. The company, like other U.S. lenders, would benefit from rate hikes this year.

Shares of JPMorgan fell 5.43% to $ 159.10 per share. pieces from kl. 11:45 ET.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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