×

Fed normalization not a risk for markets, but an opportunity: JPMorgan international chair

  • The Federal Reserve's low interest rates were a good mechanism to extinguish a fire, not a good mechanism to stimulate growth in a sustainable way, JPMorgan's Jacob Frenkel says.
  • The Fed is expected to hike rates at its December meeting and has started the process of unwinding its balance sheet.
  • While some may be concerned about market turbulence as rates rise, Frenkel said equity markets normally represent hope about the future, as opposed to a picture of the present.

Normalization of the U.S. monetary policy isn't a risk to the markets, it's an opportunity, JPMorgan International Chairman Jacob Frenkel told CNBC on Monday.

"Delayed normalization is also very, very costly," he said in an interview with "Power Lunch."

The Federal Reserve's quantitative easing "was a good mechanism to extinguish a fire. It's not a good mechanism to stimulate growth in a sustainable way."

The Fed has already raised interest rates twice this year as part of a plan to slowly normalize monetary policy. It is largely expected to hike rates by a quarter point at its December meeting.

Plus, in October the central bank began the process of gradually unwinding its $4.5 trillion balance sheet. Most of those assets consist of the Treasurys and mortgage-backed securities it purchased during its quantitative easing program.

While some may be concerned about market turbulence as rates rise, Frenkel said equity markets normally represent hope about the future, as opposed to a picture of the present.

"What is the future that the equity markets are looking at? They look, for example, [at] tax reform. They look [at] deregulation. They look [at] normalization. They look [at] infrastructure investment. And if these things happen then productivity will also grow," he said.

— CNBC's Jeff Cox contributed to this report.

Disclaimer