Bond market chaos rumbles on, threatening to push mortgage rates higher as Dimon predicts Fed intervention
US inflation could jump as high as 4% this year with unemployment likely to swell and economic growth set to nosedive as a result of the Trump administration’s tariff war, according to a Federal Reserve official.
John Williams, president and chief executive officer of the New York Fed, highlighted the “pervasive sense of uncertainty” spreading through the US economy Friday, as President Trump’s standoff with China continued to roil global markets and raise fears of a looming downturn.
In prepared remarks, Williams highlighted a “sharp decline” in consumer sentiment and business expectations for the year and said he now sees inflation potentially topping out at between 3.5% and 4% because of the trade war launched by the president in the White House’s Rose Garden last week.
That would mark a significant increase from current inflation levels, with the central bank’s preferred price growth gauge sitting at 2.5% in February, and Williams also said unemployment could rise as high as 5% before the end of the year unless the economy’s jitters ease.
His remarks suggest the Fed’s outlook on the economy has darkened significantly because of the tariff flurry, which has seen the US slap huge charges on all Chinese imports and sparked furious countermeasures by China on American goods entering the country.
Minutes from the Fed’s March meeting showed that central bank decisionmakers expected inflation to rise by 2.7% this year, with gross domestic product (GDP) projected to see a 1.7% jump – but Williams now says overall growth will probably slow “considerably” from last year’s pace and land below 1%.
Bond yields rising again, sparking fears of jump in mortgage rates
Meanwhile, 10- and 30-year US Treasury bond yields ticked higher Friday, heightening fears that mortgage rates are on the way up as the bond market continues to give Trump’s trade war the thumbs-down.
A fire sale in US Treasuries gathered pace overnight, sending their yields soaring and likely pushing mortgage rates higher as investors sounded the alarm on President Trump’s tariff war.\https://t.co/0a9yr4Cnce
— Mortgage Professional America Magazine (@MPAMagazineUS) April 9, 2025
The Treasuries market was headed for its biggest weekly loss for nearly six years while the dollar’s plunge continued with no end in sight to the US-China trade spat.
Those trends are likely to trigger a Treasuries “kerfuffle”, according to JPMorgan Chase and Co chief executive officer Jamie Dimon – and likely intervention by the Fed.
In an earnings call, Dimon said the Fed would probably eventually step in to ease the market’s nerves when “they start to panic a little bit.”
Dimon, credited alongside billionaire Trump backer Bill Ackman as a key influence in persuading the president to pause tariffs on other countries for 90 days, also said this week that the trade war would probably plunge the US into recession.
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