JPMorgan Expects a Nine Straight Rates Hike by FED to Tone Down Inflationary Pressure

JPMorgan Chase & Co economist expects the US Federal Reserve is likely to raise interest rate by 25 basis points in nine consecutive meetings to tame down inflation.

The banking giant along with others on Wall Streets are betting for a fast than expected policy tightening after US consumer prices posted the biggest jump since 1982 in January. Earlier Goldman Sachs Group Inc also forecasted seven hikes this year, up by prediction of five.

“We now look for the Fed to hike 25bps in each of the next nine meetings, with the policy rate approaching a neutral stance by early next year,” the JPMorgan team, led by chief economist Bruce Kasman, said in a research note.

January US inflation readings “surprised materially to the upside”, the economists wrote. “We now no longer see deceleration from last quarter’s near-record pace.”

On inflation, the economists said a “feedback loop” may be taking hold among strong growth, cost pressures and private-sector behaviour that will continue even as the intensity of current price pressures in the energy sector eventually fade, as reported by Bloomberg.

“The risk that central banks shift and perceive a need to generate slow growth — and the corresponding impact on global financial conditions — is now the most significant threat to an otherwise healthy global backdrop,” the economists wrote.

The report follows comments on Friday (Feb 18) by Chicago Fed president Charles Evans on the need for a “substantial” policy shift.

“The current stance of monetary policy is wrong-footed and needs substantial adjustment,” Evans told a New York conference hosted by the University of Chicago Booth School of Business, citing the hottest inflation in 40 years.