J.P. Morgan expected the U.S. Federal Reserve to pause interest rate hikes in the meeting next week after all the turmoil in the banking system in the past two weeks.
The crash in the U.S. banking sector sends a ripple effect to the financial sector and the economy fast and hard. Bob Michele, the chief investment officer of fixed income at J.P. Morgan Asset Management, warned that the impact of this event could result in the U.S. economy facing a hard landing, while saying that a recession is inevitable.
The chief noted that the Fed’s attempt to tamper inflation by raising interest rates is yesterday’s battle as he believed policy rates have reached its peak and bringing stability in the financial system should be the Fed’s top priority now.
Despite his forecast that the rate hike is done and Treasury yields are trending downward, he still recommended that the best investment strategy right now amid upcoming recession would be to stick with high quality bonds. He stated that the whole Treasury yield curve would come down to as low as 3% by August.
Prior to the event with the American banks, Michele expected the central bank to raise interest rates in February and March before pausing to assess the situation.