Borrowing costs surge as Dimon sounds alarm

BORROWING costs rose on both sides of the Atlantic as investors scaled back bets on interest rate cuts.

The US ten-year bond yield rose to 4.46pc – its highest level since November – while the equivalent in the UK hit a fiveweek high of 4.13pc.

The rise in bond yields – which feed through to the cost of mortgages and other loans – came amid fresh doubts over when central banks will cut interest rates and by how much.

Jamie Dimon, chief executive of investment bank Jp Morgan yesterday warned that inflation may not fall as far as hoped – meaning rates will stay higher than expected for longer.

In his annual letter to shareholders, Dimon said the bank has plans for US interest rates to be anywhere between 2pc and 8pc due to the impact of high government spending.

They are 5.5pc in the US and 5.25pc in the UK. ‘It is important

to note that the economy is being fuelled by large amounts of government deficit spending and past stimulus,’ Dimon wrote. ‘There is also a growing need for increased spending as we continue transitioning to a greener economy, restructuring global supply chains, boosting military expenditure and battling rising healthcare costs.

‘This may lead to stickier inflation and higher rates than markets expect.’ Investors now

believe there will be just two or three rate cuts in the uS and uK this year. At the start of the year it was hoped there could be as many as six.

All eyes will be on tomorrow’s inflation figures in the uS for fresh hints as to when the federal reserve will cut rates.

And the european Central Bank is expected to leave rates unchanged in the eurozone on Thursday before cutting this summer – possibly in June.