JPMorgan: Inflation Will Decline Slowly, Fed Does Not Need to Hike Rates

TechFlow news, August 12, JPMorgan Asset Management's Chief Global Strategist stated that the Federal Reserve should keep interest rates unchanged, and predicted that as increasing evidence shows a persistent wage-price spiral will not form, inflation will gradually decline. David Kelly said after the July Consumer Price Index was released: "The Federal Reserve should absolutely stand pat, I actually think they will do so." The report showed that U.S. core inflation in July remained moderate, and after the news was released, U.S. Treasury bonds continued their upward trend. Kelly pointed out that three forces are jointly pushing inflation to cool significantly: tariff costs will decline on a year-over-year basis; as the market optimistically believes the Iran war will end, oil prices will fall back; and wage growth continues to lag behind inflation. He added that this last point weakens the momentum needed for price pressures to form a self-reinforcing cycle, and also means the Federal Reserve has no need to curb inflation by raising interest rates. Kelly pointed out that financial markets currently have high leverage levels, and even a small interest rate hike could also trigger asset repricing. (Jin10)