JPMorgan: Inflation Stickier Than Expected, Fed May Need to Raise Rates This Year
Alina Collins
JPMorgan chief global economist Bruce Kasman warns that U.S. inflation's built-in stickiness is underpriced by markets; if the data hold, the Fed may have to hike before year-end — upending the consensus narrative of cuts or a prolonged hold.
What exactly is Kasman saying?
Kasman told CNBC: "The underlying story on inflation is stickier than people appreciate."
This means → the headline decline in inflation may be a surface read; underlying price pressures have not truly faded.
JPMorgan's official forecast puts the first hike in 2027, but Kasman says real-time data could pull that timeline forward sharply — to late this year.
Why is the labor market the key variable?
Kasman notes that firms, after a cautious pause following policy announcements, are returning to normal hiring rhythms.
At the same time, AI is boosting economic demand — but labor supply remains constrained. In plain terms = more work, not more workers, so wages rise and feed back into inflation.
His explicit call: "The issue the Fed will face over the next six to nine months is that the labor market is going to tighten."
Can the consumer hold up?
Kasman's read: consumers have been hit by energy shocks but are "bent, absolutely not broken."
This means → the demand side won't drag the economy down — it may actually keep fueling the fire, making inflation harder to cool.
Both tech and non-tech sectors show cyclical uplift, signaling that the economy still has internal momentum.
If the Fed does hike, what happens to stocks?
Kasman acknowledges that healthy corporate earnings currently support equities, but he invokes a historical pattern as a warning.
"History shows that when the Fed starts to hike, it usually doesn't stop at one." Put simply = once the gate opens, expect a series, not a one-off.
This means → more aggressive tightening could ultimately threaten both equities and broader economic growth.
What should markets watch in the second half?
The core variable is singular: whether inflation stickiness, amid a tightening labor market, forces the Fed's hand ahead of schedule.
If employment data stay tight and inflation readings rebound rather than fall, markets will have to reprice from "waiting for cuts" to "bracing for hikes."
This reflects a deeper signal: the current market consensus — Fed on hold or cutting — may rest on a systematic underestimation of inflation stickiness.
Content is for reference only, not financial advice.