J.P. Morgan shifts Fed rate-hike forecast to December after Warsh press conference

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J.P. Morgan abruptly shifted its Federal Reserve interest-rate forecast to a hawkish stance, now expecting a 25-basis-point rate hike in December instead of the second half of 2027. Chief U.S. Economist Michael Feroli said in a client note that the Fed would raise rates in December and then hold the Federal Funds Rate at 3.75%-4.00%, while warning that a September increase is a real risk. The revision followed Fed Chair Kevin Warsh's July 29 press conference, where his ambiguous remarks on inflation strategy and the future of the PCE price index as the primary inflation gauge raised concerns about policy credibility. Feroli wrote that Warsh's comments involved 'a lot of well-turned phrases but little in the way of a coherent macro view,' adding that the new chair 'once again failed to specify how he intended to achieve his stridently asserted inflation resolve,' creating additional uncertainty for financial markets. The FOMC had voted 9-3 to hold rates steady at 3.5%-3.75%, with three regional Fed presidents dissenting in favor of a hike.

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