Fed Hike Forecast: One More Rate Increase in December

J.P. Morgan's chief U.S. economist Michael Feroli believes that the Federal Reserve will deliver one more rate hike in December, but not a prolonged tightening cycle. The forecast is based on supply shocks driving inflation.

The Fed raised its target range to 3.75% to 4% on September 16 with a 12-0 vote, marking the first hike since 2023. Core Personal Consumption Expenditures (PCE) inflation has topped 3% every month this year, and while prices cooled more than expected in August, rising to 3.4%, rather than the expected 3.7%, Feroli sees no protracted hiking cycle extending into next year.

The September hike also protected the Fed's credibility, according to Feroli, as Chair Kevin Warsh had repeatedly warned against tolerating inflation. J.P. Morgan's December call matches the median on the dot plot, a chart of each official's rate projection.