JPMorgan strategists urge the Federal Reserve to keep interest rates unchanged.
2026-08-13 02:38:56
The chief strategist at JPMorgan Asset Management hopes the Federal Reserve will do something that central bank officials rarely praise for: hold rates steady. 
In an interview with Bloomberg Television on August 12, David Kelly, chief global strategist at JPMorgan Asset Management, stated that the Federal Reserve should have kept interest rates unchanged after the release of the July Consumer Price Index (CPI). His reasoning was straightforward: core inflation is cooling, and the best course of action now is to let this trend develop naturally without intervention. Reasons for Maintaining the Status Quo Kelly bluntly stated his view on policy direction. "They absolutely should keep interest rates unchanged, and I think they will," he said in the interview, while expressing confidence that the central bank will withstand pressure from all sides and neither raise nor lower rates. He described the current inflation environment as "Teflon inflation," a vivid description of how price pressures can no longer be sustained as they have in the past. The July CPI data corroborated his view: core inflation was moderate, pushing up US Treasury bonds, and the bond market also priced in more dovish policy expectations. Kelly's view is not recent. As early as June, he argued that with inflation data peaking, the wisest choice for the Federal Reserve was to stick to its current interest rate policy. Two months have passed, and various data seem to confirm his judgment. The actual signals released by the data, particularly the July Consumer Price Index (CPI) figures, are a key support for Kelly's view. The moderate core inflation, excluding volatile food and energy prices, further illustrates that the worst of the post-pandemic price surge is completely over. The Treasury market has also reacted accordingly. When core inflation data falls short of expectations, investors bet that the Federal Reserve will not need to further tighten monetary policy, and bond prices often rise accordingly. This is exactly the case this time; after the report was released, US Treasury prices rose. Kelly predicts that the Federal Reserve will keep interest rates unchanged until at least the end of 2026.
In an interview with Bloomberg Television on August 12, David Kelly, chief global strategist at JPMorgan Asset Management, stated that the Federal Reserve should have kept interest rates unchanged after the release of the July Consumer Price Index (CPI). His reasoning was straightforward: core inflation is cooling, and the best course of action now is to let this trend develop naturally without intervention. Reasons for Maintaining the Status Quo Kelly bluntly stated his view on policy direction. "They absolutely should keep interest rates unchanged, and I think they will," he said in the interview, while expressing confidence that the central bank will withstand pressure from all sides and neither raise nor lower rates. He described the current inflation environment as "Teflon inflation," a vivid description of how price pressures can no longer be sustained as they have in the past. The July CPI data corroborated his view: core inflation was moderate, pushing up US Treasury bonds, and the bond market also priced in more dovish policy expectations. Kelly's view is not recent. As early as June, he argued that with inflation data peaking, the wisest choice for the Federal Reserve was to stick to its current interest rate policy. Two months have passed, and various data seem to confirm his judgment. The actual signals released by the data, particularly the July Consumer Price Index (CPI) figures, are a key support for Kelly's view. The moderate core inflation, excluding volatile food and energy prices, further illustrates that the worst of the post-pandemic price surge is completely over. The Treasury market has also reacted accordingly. When core inflation data falls short of expectations, investors bet that the Federal Reserve will not need to further tighten monetary policy, and bond prices often rise accordingly. This is exactly the case this time; after the report was released, US Treasury prices rose. Kelly predicts that the Federal Reserve will keep interest rates unchanged until at least the end of 2026.
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