After the Federal Reserve’s decision… JPMorgan sets a new date for raising interest rates

JP Morgan raised its expectations regarding the date of raising US interest rates, suggesting that the Federal Reserve will raise interest rates by a quarter of a percentage point next December, instead of its previous expectations that indicated an interest rate hike during the second half of 2027, following the central bank’s decision to stabilize interest rates at its meeting during July.
The review came after the Federal Reserve remained unchanged, while its Chairman, Kevin Worsh, renewed the bank’s commitment to returning inflation to its target of 2%, but did not provide clear signals regarding the next steps for monetary policy, despite inflation continuing above this target level for more than five years.

Fears of curbing inflation

JPMorgan said in a research note: Worsh’s statements raised doubts about his ability to achieve the goal of lowering inflation, considering that this may increase pressure on the rest of the members of the Open Market Committee to move in line with the central bank’s mandate to maintain price stability.
The bank indicated that the decision to stabilize interest rates, which was widely expected, witnessed objection from three out of 12 members of the Open Market Committee, as they supported raising interest rates by a quarter of a percentage point.
Despite the acceleration in the fundamentals over the past month, driven by higher fuel and food prices, along with strong spending related to artificial intelligence investments, the head of the Federal Reserve did not consider raising interest rates necessarily the appropriate option at the current stage.

Interest rates

JP Morgan expected the Federal Reserve to keep interest rates within a range of 3.75% – 4.00% after implementing an expected increase in December, noting that the possibility of raising interest in September remains if inflation continues to accelerate.
According to CME Group’s FedWatch tool, markets expect 65.2% to raise interest rates in September, compared to 81% before the latest monetary policy statement.

Varying expectations

Financial institutions have different estimates regarding the next path of US monetary policy, as both Goldman Sachs and Barclays still expect to stabilize interest rates until the end of the year.
In contrast, Bank of America Global Research expects three successive interest rate increases starting in September.
As for Citigroup, known for its supportive expectations for easing monetary policy, it maintained its previous estimates of reducing interest rates in October and December of this year, in addition to another reduction in January 2027, despite the results of the Federal Reserve meeting in July.