- JPMorgan Chase is preparing for the risk of zero-per cent interest rates in the US, CEO Jamie Dimon said at a New York conference Tuesday.
- The executive noted certain businesses are more affected by neutral or negative rates than others, saying banks can cut costs and boost fees to address tightening margins.
- Dimon admitted the recent drop in US interest rates surprised him. He predicted in 2018 that rates would rise.
- Watch JPMorgan Chase trade live here.
JPMorgan Chase is preparing for the risk of zero-per cent interest rates in the US, according to Jamie Dimon, despite his doubt of rates ever falling so low.
The bank’s CEO said at a New York conference Tuesday that the recent spell of falling rates surprised him.
“I don’t think we’ll have zero rates in the US, but we’re thinking about how to be prepared for it, just in the normal course of risk management,” Dimon said. “Obviously, you’ve got to worry about the long term effect of those interest rates.”
Dimon added banks can cut costs, boost efficiencies, and charge customers more in fees to account for slowing margin growth. Falling rates led several banks to bring in lower-than-expected interest income over recent months, according to several banks’ quarterly filings.
“There are businesses it doesn’t affect at all. And there are businesses where it just sucks into your margin and there’s very little you can do about it,” the CEO said.
Dimon told investors in May 2018 they should prepare for possible 4% yields in 10-year Treasury bonds, as well as higher market volatility. Though the former prediction never game to be, markets saw wild swings through the summer as the US-China trade war raged on and key recession indicators flashed their first warnings in decades.
The JPMorgan executive isn’t the only one keeping negative rates in the realm of possibilities. Former Fed chairman Alan Greenspan said in August he wouldn’t be surprised to see Treasury yields reach negative rates, adding that such a move wouldn’t be very significant anyway.
“There is no barrier for US Treasury yields going below zero,” Greenspan said. “Zero has no meaning, besides being a certain level.”
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