JPMorgan CEO Jamie Dimon sees interests rates normalizing as the economy continues to grow and central banks unwind years of stimulative monetary policy.

“It would be a reasonable expectation that with normal growth and inflation approaching 2%, the 10-year bond could or should be trading at around 4%,” Dimon said in his annual letter to JPMorgan shareholders. “And the short end should be trading at around 2 1⁄2% (these would be fairly normal historical experiences).”

Presently, the 10-year yield (^TNX) is right around 2.8%. Meanwhile on the short end, the 2-year yield (^USTTWO) is at 2.3%.

The recovery in interest rates would follow what has been nearly four decades of falling rates.

When the financial crisis hit the markets in 2008, the Federal Reserve embarked ultra easy monetary policy, which included cutting short-term interest rates to effectively 0% while suppressing longer term interest rates through the purchases of long term Treasury debt and mortgage-backed securities — a program informally referred to as quantitative easing.

With the economy on more sound footing, the Fed has been slowly unwinding these moves.

In his letter, Dimon warned that that this process could potentially come with some unwelcome developments.

“One scenario that we must be prepared for is the possibility that the reversal of quantitative easing (QE) by the world’s central banks — in a new regulatory environment — will be different from what people expect,” he said. “Importantly, as long as rates are rising because the economy is strengthening and inflation is contained, it is reasonable to expect that the reversal of QE will not be painful.”

The Fed and its global central bank peers have been notably slow to unwind policy. One important reason why they have been able to be so patient is because inflation and wage growth has been very cool.

Dimon cautions that this extended period of low inflation is no reason to get complacent.

“We have to deal with the possibility that at one point, the Federal Reserve and other central banks may have to take more drastic action than they currently anticipate – reacting to the markets, not guiding the markets,” he said. “A simple scenario under which this could happen is if inflation and wages grow more than people expect. I believe that many people underestimate the possibility of higher inflation and wages, which means they might be underestimating the chance that the Federal Reserve may have to raise rates faster than we all think.”

An entire generation of investors and financial pros have experienced nothing but falling interest rates. Perhaps we’re finally getting to a point where interest rates really have nowhere to go but up.