JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said it’s possible U.S. growth and inflation prove fast enough to prompt the Federal Reserve to raise interest rates more than many anticipate, and it would be wise to prepare for benchmark yields to climb to 4 percent.
“It might force the 10-year up” if the Fed boosts short-term rates more than expected, Dimon said in an interview with Bloomberg Television’s Stephen Engle in Beijing, referring to the yield on 10-year Treasury notes. “You can easily deal with 4 percent bonds and I think people should be prepared for that.”
As long as rates climbed because the U.S. economy was in good health, the move would amount to “normalization,” Dimon said.
With the Fed paring back its balance sheet and the federal government increasing its borrowing, the U.S. will have to finance by the end of the year “$400 billion a quarter — that’s a lot, that’s a huge shift from the past,” Dimon also said. Along with cutbacks in bond purchases by other central banks, it “may cause more volatility, higher rates in a way we don’t fully understand” given the exit from quantitative easing is unprecedented, he said.
(Related: Readying for Higher Interest Rates)