JPMorgan expects the Fed to raise interest rates in September
The Fed is likely to deliver another big rate hike in September, but it could be the last of that magnitude this year as growth begins to slow, according to JPMorgan Chase strategists.
In an analyst note on Monday, JPMorgan strategists led by Mislav Matejka said they expect the trade-off between growth and monetary policy to improve in the coming months as the Fed heads towards lower rate hikes.
“We expect another massive Fed hike in September, but then we will look for the Fed not to surprise markets on the hawkish side again,” they wrote.
Officials agreed to two consecutive rate hikes of 75 basis points in June and July – three times the usual size – and have hinted that another rate hike of that size is on the table in September, depending on economic data. The minutes show that officials expect to agree to a smaller 50-point increase in September, although they acknowledge that the pace depends on the data.
Bulging still wipes out average Americans’ wage earnings
Minutes released last week from the Federal Reserve’s July meeting show that officials are likely to remain on a hawkish path, despite hopes from markets in recent weeks that policy makers may slow the pace of interest rate hikes.
“Participants agreed that there is little evidence so far that inflationary pressures are abating,” the minutes said. “They have seen that inflation will respond to the tightening of monetary policy and moderation associated with economic activity with a delay and may remain uncomfortably high for some time.”
While the pace of rapid price increases eased slightly in July with the monthly increase stable at 0%, The consumer price index continues to rise The Labor Department reported last week that 8.5% from the previous year — hovering near a painful four-decade high. Markets rebounded on the lighter-than-expected report, as investors hope the Federal Reserve will take a step back from gas in the coming months.
Stronger-than-expected data, including strong retail sales reported last week and an explosive July jobs report, could make the case for another massive rate hike next month.
Traders are already pricing in a 56% chance of another three-quarter percentage point increase in the fall, according to CME Group’s FedWatch tool, which tracks trading. However, another 44% think the Fed will go half a point instead.
CLICK HERE TO READ MORE ABOUT FOX BUSINESS
Chairman Jerome Powell is expected to provide some clues to the Fed’s thinking about the economy and future rate hikes when he speaks at the annual Jackson Hole Economic Symposium at 10 a.m. ET on Friday.
Most experts believe that Powell will reiterate the central bank’s commitment to controlling inflation.