According to economists at JPMorgan Chase, the US regulator is likely to surprise markets by raising interest rates at each of its next nine meetings. Thus, the US economy could see a nine-fold increase in the Fed's key rate by the end of 2022, the investment bank assumes.
This scenario is likely since inflation in the United States remains alarmingly high. JPMorgan Chase analysts expect the regulator to hike interest rates by 25 basis points at nine consecutive meetings with a view to tamping down inflation. In this case, the policy rate will approach a neutral stance by early 2023, the bank predicts.
In January 2022, US inflation accelerated to an impressive 7.5% on a year-on-year basis, reaching a 40-year high. The inflationary spiral is unlikely to slow down in the near time, JPMorgan Chase noted.
In the current economic situation, a so-called “feedback loop” may be taking hold between strong growth, cost pressures, and private sector behavior. It will continue even if price pressures in the energy sector ease, economists believe.
The current shift in central banks’ monetary policies will barely have a severe impact on the situation. Regulators in a number of countries perceive the need for change, but many policymakers prefer to stick to a go-slow approach to monetary policy tightening. One of the supporters of such moderate developments is FOMC member and Chicago Fed President Charles Evans. Notably, the JPMorgan Chase report followed Evans' comments about the current monetary policy. "The current stance of monetary policy is wrong-footed and needs substantial adjustment," he said.
