JPMorgan expects string of nine straight Fed rate hikes

January U.S. inflation readings ‘surprised materially to the upside’.
Image: Erin Scott, Bloomberg

JPMorgan Chase & Co. economists said the Federal Reserve is likely to raise interest rates by 25 basis points at nine consecutive meetings in a bid to tamp down inflation.

The bank is joining others on Wall Street in ramping up bets for faster policy tightening, after U.S. consumer prices posted the biggest jump since 1982 in January. Goldman Sachs Group Inc. is forecasting seven hikes this year, up from its earlier prediction of five.

“We now look for the Fed to hike 25bp at 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 U.S. 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 between strong growth, cost pressures, and private sector behavior that will continue even as the intensity of current price pressures in the energy sector eventually fade.

“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 Friday 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.

© 2022 Bloomberg L.P.

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