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Will US Interest Rates Climb To 8% ?!
April 9, 2024
9:51 am
Dean
Valhalla Mountains, British Columbia
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The CEO of the JPMorgan Chase Bank thinks they could . . .

And of course if that happens, Canada's interest rates will most likely go Up too.

What say you ?

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

April 9, 2024
10:17 am
mordko
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Of course they COULD. He is leaving quite a bit of room by saying “between 2 and 8%”.

In a somewhat similar situation in late 60s Friedman made a prophecy. First, he laid out a basic timeline for the dynamic he had described. “The initial effects of a higher and unanticipated rate of inflation lasted for something like two to five years,” he argued, and then the effect was reversed. Here is where the unlovely combination of high unemployment and high inflation would occur. Eventually, the economy would recover, but “full adjustment to the new rate of inflation takes about as long for unemployment as for interest rates, say, a couple of decades.” Then he got specific. At the end of 1966, Friedman argued, the Fed had made one of its “drastic and erratic changes of direction,” expanding the money supply “at a more rapid pace than can long be maintained without appreciable inflation.”68 The math was simple. If Friedman was right, by 1972 the beneficial effects of this expansion would have expired, and unemployment would surge. It would then take up to twenty years for the economy to stabilize and recover the good times.“

At the time the prediction flew against conventional wisdom (based on Keneysian economics which suggested that inflation was good for jobs) but proved to be surprisingly accurate. Inflation can be very sticky once expectations set in.

April 9, 2024
1:25 pm
Alexandre
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Dean said
What say you ?

    Dean

  

This absolutely will not happen in 2024, inflation or no inflation. It is an election year in the US and minority government in Canada. At most, rates will stay where they are in these two countries this year, but I expect them go down.

April 9, 2024
3:44 pm
Dean
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I'm mostly with you on this one, Alexandre

But I don't have the background, education, or knowledge that CEO has ... so maybe he's right !

I broke my crystal ball last month, so I guess we'll just have to; Wait 'N See. sf-wink

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

April 9, 2024
4:25 pm
Lodown
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Dean said
.
The CEO of the JPMorgan Chase Bank thinks they could . . .

And of course if that happens, Canada's interest rates will most likely go Up too.

What say you ?

    Dean

  

He did not say he expects 8%. What he said follows. He is simply being a prudent banker and is ready for a 3% change up or down from the current 5%.
Regardless, of his comments as a banker, the current overall consensus from many corners is for a decline in rates over the next 6-8 months

"In his annual letter to shareholders, Mr Dimon said that the bank was ready for a "very broad range" of rates, from 2% to 8% or even higher, potentially pushed up because of high government spending and the need to curb price rises."

April 10, 2024
4:54 am
Alexandre
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Dean said
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I'm mostly with you on this one, Alexandre

But I don't have the background, education, or knowledge that CEO has ... so maybe he's right !

As a CEO he has the right expectations that rates must be higher: "Last year he suggested rates could hit 7%."

Not only I agree with that, but I would say they should have been even higher, perhaps as high as 10% in Canada.

But he didn't take into consideration that we live in a society where politicians decide what's best to have them reelected, and not what's necessarily best for the economy.

April 10, 2024
5:09 am
zgic
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But the US Prime rate is already more than 8%. Are we talking about the Fed Rate? I don't think that would be sustainable.

US : 8.500%
Effective Date: July 28th, 2023

April 10, 2024
9:40 am
Dean
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You're right, Zgic ... that big bank CEO doesn't specify 'which' rate he's talking about, but I assume it's the US Fed Rate.

Time will tell . . .

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

April 10, 2024
10:01 am
Bill
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In a democracy politicians ought to do what the largest group of people want, never mind whether it's the right thing or not, that's the essence of democracy. So I don't fault them for doing things that get them re-elected, that indicates they're doing (most of) the people's will and that's the objective.

April 10, 2024
10:13 am
Loonie
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Dimon doesn't have a shinier crystal ball than anyone else. He's right to allow for such a wide range of possible rates.
The financial industry wonks were all caught with their pants down in 2008. That's "bad for business", including theirs, so they want to avoid a replay.

FWIW, I lean towards expecting higher rates in 2025 and beyond. Seems obvious to me, no crystal ball required, that climate change issues are not being adequately addressed on a global basis. So we can expect more fires, droughts, war, loss of species, contagious diseases, rising dying oceans, extreme weather events etc. All of this creates scarcity and increased human needs. How does that not add up to inflation?? Tools for dealing with that seem quite limited and typically include rate hikes.

April 10, 2024
11:41 am
Dean
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Meanwhile ... back in Canada

No surprise there.

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

April 10, 2024
1:07 pm
savemoresaveoften
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Dean said
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Meanwhile ... back in Canada

No surprise there.

    Dean

  

Economists are the thickest skin of all profession out there. If BoC ends up holding rate unchanged past July, economists will just push out their rate cut call. Eventually they will be right.
All we need is one higher CPI print than expected, and BoC will wait, exactly what’s being priced in the US today.

April 10, 2024
5:01 pm
Dean
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    'Economists' , you say ❗

I rank them right down there with Used Car Salesmen and Sly Hoodwinkers. sf-confused

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

April 10, 2024
5:33 pm
Lodown
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Dean said
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    'Economists' , you say ❗

I rank them right down there with Used Car Salesmen and Sly Hoodwinkers. sf-confused

    Dean

  

What Is an Economist?
An economist is an expert who studies the relationship between a society's resources and its production or output. Economists study societies ranging from small, local communities to entire nations and even the global economy.

Nothing wrong with Economists....there is only a problem with those who spout out thinking they are Prognosticators!

April 10, 2024
6:49 pm
Dean
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Your textbook definition is correct, Lodown.

Unfortunately far too many Economists end up being Full of themselves, and become the self-appointed Prognosticators you mention above. Hence, the Lack of respect they garner from Many.

But we digress ... back to the subject at hand, eh. sf-smile

What's your take on it ?

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

May 2, 2024
5:16 pm
gicbits
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I wouldn't take anything that crook says seriously.

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