The United States Federal Reserve has taken drastic measures to curb inflation by increasing interest rates. Indications suggest that these measures will continue in the coming year.
Cathie Wood of Ark Invest is warning that this could have severe implications, as she likened the current scenario to the events preceding the Great Depression in a series of tweets from November.
“The Fed raised rates in 1929 to squelch financial speculation and then, in 1930, Congress passed Smoot-Hawley, putting 50%+ tariffs on more than 20,000 goods and pushing the global economy into the Great Depression,” Wood said. “If the Fed does not pivot, the set-up will be more like 1929.”
Wood continued by warning that the central bank is “ignoring deflationary signals” while simultaneously warning that the Chips Act “could harm trade perhaps more than we understand.
Despite her warning, experts believe the FED will continue raising rates.
JPMorgan Chase CEO Jamie Dimon believes the Federal Reserve will raise interest rates to a higher level than what has been predicted by many officials and strategists from Wall Street, as the central bank continues its efforts to combat ongoing inflation.
The top executive of JPMorgan, the leading consumer bank in the United States based on assets, stated during an interview with Fox Business Network on Tuesday that the terminal rate set by the Federal Reserve may reach 6%, which is significantly higher than the 5% many experts have predicted.
“Whether 5% interest rates are enough to slow inflation to where it needs to be, I don’t know,” Dimon said when referring to fiscal stimulus that was “so large and still largely unspent.”
“Is it 5%? My view is, it may very well be 6%,” he said.
On Tuesday, while speaking to Fox Business, Dimon called on the Fed to move rates to 5% and then wait before raising rates more to see how the economy reacts.
“We were a little slow getting going. It caught up. I don’t think there’s any harm done by waiting three to six months to see what the full effect this is around the world,” he said. “I’m on the side where it may not be enough.”
Dimon also noted that he doesn’t think wage inflation will peak “the way people think.”
After the December jobs report showed a decrease in wage growth, stocks experienced their initial significant increase of the year. Despite this, the report also indicated a significant discrepancy between the availability of jobs and the number of workers seeking employment.
“The lower-paid Americans are getting wages higher than the rate of inflation, and I don’t think in total that’s a bad thing — that’s a good thing,” Dimon said, adding his workers “haven’t had a pay raise for 20 years.”
“Inflation won’t quite go down the way people expected, though it will definitely be coming down a bit,” he said.