Inflation has always been a global economic issue of concern, and on the eve of the release of the US core consumer price index (CPI), which is closely related to inflation, Phoebe White, an executive director at JPMorgan Chase, recently interviewed and said that the release of this CPI data may affect the Federal Reserve's (Fed) interest rate cut decision in December. The market generally expects the core CPI to remain stable, but if the result exceeds expectations, it may prompt the Fed to reconsider another rate cut at the end of the year.
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ToggleInflationary pressures persist, the Fed may make a modest rate cut in December
White said that JPMorgan Chase expects the core CPI to rise by 0.4%, slightly higher than the market consensus, but she believes the Fed may still make a modest rate cut in December. The Fed's current focus is to adjust interest rates to a "neutral" level to address long-term economic growth and inflationary pressures.
The market is concerned about stagflation, policy uncertainty exacerbates inflation risks
White also said that the market had previously believed that inflation was slowing down in the past few months, but recent data has shown signs of stagnation, so investors may need to re-evaluate their expectations of a decline in inflation. White further said that recent changes in the US political landscape, along with new rounds of trade tariffs and future changes in immigration policy, could all push up prices. Taken together, these factors could affect wage growth and increase upside risks to inflation.
Changes in the market yield curve reflect a rise in short-term inflation expectations
White pointed out that the recent rise in the yield curve in the bond market reflects investors' expectations that prices will rise in the short term, which may be due to the impact of higher trade tariffs. She explained that while short-term rates have risen, the increase in long-term inflation expectations is not large, indicating that the market believes inflation is mainly influenced by external factors rather than persistent upward pressure.
If participating in the FOMC meeting, support another rate cut in December but suggest a slower pace
When asked what recommendations she would make if she could participate in the next FOMC meeting, White said she supports another modest rate cut in December to stabilize the economy, but also suggests a slower pace afterwards. She emphasized that assuming economic growth is stable by 2025 and inflation is likely to remain at a certain level, it would be difficult to see much change. She further said that the Fed needs to consider reducing the frequency of rate cuts to avoid the market developing expectations of continued rate cuts, which could lead to economic imbalances.
Forecast that the Fed's future rate cut frequency in 2025 will be "once a quarter"
White said that JPMorgan Chase's current forecast is that the Fed may adopt a "once a quarter" frequency for rate cuts in 2025, rather than "cutting rates at every FOMC meeting". She pointed out that this adjustment can help stabilize the labor market and address the uncertainty of inflation.
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