Quickfire Rate Rises Tipped as Economy Powers Ahead

JPMorgan CEO Jamie Dimon and consultancy PwC have just delivered a similar message on interest rates: they're going to rise and probably a lot faster than many people anticipate.

istock-481466958-compressorTheir hawkish predictions chime with recent comments from two senior-ranking Fed officials, who both suggested rates may have to rise quickly to head off inflation.

Such an outcome implies a return to the “normal” kind of conditions not seen since before the financial crisis of 2008, when it was more expensive to borrow money but easier to generate capital from less-risky investment options such as cash and bonds.

It’s a scenario that could be welcomed by CEOs in the banking, insurance and and funds management sectors left grappling with meager returns on investment. Companies sitting on large cash balances, such as Apple and Google, also could enjoy the opportunity to earn more on vanilla deposits.

On the flipside, higher rates could discourage some households and businesses from borrowing, potentially making life tough for CEOs in the housing and retail sectors—and even among the banks if consumer confidence slumps. Higher rates would also mean a higher dollar, potentially stripping the manufacturing sector of a competitive advantage.

“Higher rates could discourage some households and businesses from borrowing, potentially making life tough for CEOs in the housing and retail sectors—and even among the banks if consumer confidence slumps.

“I believe America is doing better than people think and therefore interest rates are probably going to be stronger than people think,” Dimon told the JPMorgan Healthcare conference in San Francisco on Monday.

His comments came as PwC made its key global economic predictions for 2017. Chief among them was an expectation that U.S. rates will indeed head north. “It is possible the Fed could tighten faster than currently suggested depending on the pace, size and implementation of the new administration’s fiscal plans,” PwC said. “On the flipside, economies which rely on the dollar for financing will come under pressure.”

Donald Trump’s pledges to slash taxes and loosen regulation prompted Richmond Fed President Jeffrey Lacker on Friday to suggest rates may need to increase “more briskly than markets appear to expect.”

On Monday, Boston Fed President Eric Rosengren warned of inflation risks if the Fed doesn’t speed up its normalization of monetary policy. “I expect that appropriate monetary policy will need to normalize more quickly than over the past year,” he said.

The Fed raised interest rates in December by a quarter of a percentage point—building on a quarter percentage point rise a year earlier—and policymakers said they expected to hike rates three more times in 2017.


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.