Central Banks May Raise Rates More Than Expected, JPMorgan Warns

JPMorgan's meeting minutes indicate that major global central banks may raise interest rates more than anticipated, but this could not necessarily end the equity rally. The bank's economists expect eight out of nine developed-market central banks to hike by the end of 2026.

The current rate curves price in roughly 100 basis points of modest tightening, which is significantly lower than JPMorgan's expectations of 100-200 basis points of additional tightening. This discrepancy suggests that market pricing may severely underestimate the magnitude of tightening.

JPMorgan's economists believe that the balanced Taylor rule points to a higher neutral rate positioning for the Federal Reserve, which could lead to faster and larger hikes. Additionally, inflation's structural stickiness exceeds what forecasting models can capture, making it difficult to predict future price movements.