Kelly vs Market: JPMorgan Strategist Predicts No Rate Hike This Year

JPMorgan's top global strategist David Kelly believes that the Federal Reserve will not raise interest rates this year, contradicting market expectations.

Kelly told Marketplace Morning Report in August that he expects Fed Vice Chair Kevin Warsh's first Jackson Hole speech to signal a hold on rate hikes through the end of the year.

This view is at odds with the bond market and futures traders, who are pricing in a 60% chance of a September rate hike, according to CME Group's FedWatch Tool.

Kelly's logic rests on data that shows gradual easing of inflation, as evidenced by core PCE rising just 0.2% month over month in July and unemployment ticking down to 4.1%.

The practical stakes are significant: if Kelly is right, the 10-year Treasury yield could retrace to around 4.3%, causing mortgage rates to ease; but if the market is correct, yields could push back through 4.75% and mortgage quotes would rise.