J.P. Morgan expects the Federal Reserve to raise rates once more in December and then stop, according to a research note from the bank's chief U.S. economist, Michael Feroli. The call lands on the median of the Fed's own dot plot — the anonymous chart where each official marks a rate projection.
The forecast rests on inflation that Feroli describes as supply-shock-driven. Core Personal Consumption Expenditures inflation, the Fed's preferred gauge and one that strips out food and energy, has come in above 3% every month this year. Feroli's view: that kind of pressure doesn't require a long tightening campaign to cool.
Why December and not October
Feroli said the case for skipping October is credible because September's move needs time to work through the economy. The Fed raised its target range to 3.75% to 4% on September 16 in a unanimous 12-0 vote. It was the first hike since 2023.
The Fed meets again on October 28 and December 9.
Traders have already trimmed their bets on an October move after New York Fed President John Williams signaled there's no urgency. Feroli still thinks December gets done.
He also argued the September hike wasn't only about the data. Chair Kevin Warsh had spent months warning against tolerating inflation, and Feroli said the hike protected the institution's credibility after those public warnings.
The supply-shock argument
Feroli's core claim is that this inflation wave traces back to supply constraints rather than demand running hot. If that's right, the Fed doesn't need to hike repeatedly to bring prices down; it needs to wait for the shocks to fade.
'Inflation continues to look supply-shock-driven, and as such we don't foresee a protracted hiking cycle extending into next year,' Feroli wrote.
The latest data gave that view some room. Prices cooled more than expected, rising 3.4% rather than the 3.7% forecast. PCE rose at the end of August, but by less than economists had penciled in.
Warsh's five reviews
Separately, Warsh has ordered five task forces to examine how the Fed makes policy. Findings are due by year-end. J.P. Morgan doesn't expect the reviews to change its rate forecast, but three of them are worth watching.
The communications review could scrap the dot plot. Feroli called the outcome uncertain and said dropping the chart without a replacement would reduce transparency.
The balance sheet review could push for a smaller Fed portfolio, something Warsh has favored. Jay Barry, J.P. Morgan's head of global rates strategy, said shrinking the portfolio would require major changes to bank rules and the payments system.
A third review will look at productivity and jobs, including artificial intelligence. Warsh has called AI disinflationary. J.P. Morgan sees no near-term policy effect from that work.
Any major change would need the full FOMC on board, so the process could move slowly.
The crypto test
The December decision matters beyond rates desks. Crypto funds pulled in $3.55 billion last week, the most in 2026, according to CoinShares. A second hike would test whether that demand holds — or whether the inflows were mostly a bet on a Fed that's nearly finished.
The next hard date is October 28. If the Fed skips, as Feroli suggests, all attention shifts to December 9.
