J.P.Morgan brings forward Fed rate hike call to December after July hold

TITLE: J.P. Morgan pushes Fed rate hike to December after July hold

META: J.P. Morgan now sees a 25‑bp Fed rate hike in December, shifting from a July hold; markets price a 65% chance of a September hike, down from 81% — see the numbers and market impact.

J.P. Morgan lifted its outlook for a Federal Reserve rate increase to the December meeting, after the central bank left policy unchanged in July, and markets trimmed the odds of a September hike to 65.2% 【3】.

Forecast shift after July hold

J.P. Morgan’s note said the Fed will deliver a quarter‑point increase in December, moving the expected hike forward from the second half of 2027 that the brokerage had previously projected 【3】. The shift follows the July FOMC decision, where three of the 12 voting members voted for a hike despite the overall “hold” outcome 【3】. The firm also warned that inflation remains above the Fed’s 2% target, which could pressure the committee to act sooner 【3】.

Market reaction and pricing

Traders now assign a 65.2% probability to a September rate hike, down from 81% before the July statement, according to the CME Group’s FedWatch tool 【3】. The reduced probability coincided with a 7‑basis‑point rise in the 10‑year Treasury yield and the 30‑year yield hitting its highest level since 2007 【4】. The bond market’s move reflects the mixed signals from the FOMC, where three members favored a hike while the majority held rates steady.

Divergent views among analysts

Other banks remain split on the path forward. Goldman Sachs and Barclays still expect rates to stay unchanged through year‑end, whereas BofA Global Research projects three hikes starting in September 【3】. Citigroup, a long‑time “dove,” continues to forecast cuts in October and December 【3】. These differing outlooks underline the uncertainty surrounding the Fed’s next move.

What to watch

• September FOMC meeting (Sept 16) – Any shift in the Fed’s voting stance could swing market pricing.
• Core inflation data – A reading above or below the 2% target will influence the likelihood of a September hike.
• FedWatch probability – Changes in the CME tool’s implied probability will signal market consensus on the timing of the next move.

The December hike forecast highlights the Fed’s balancing act between lingering inflation pressures and a still‑tight labor market, leaving the path to future policy moves highly contingent on upcoming data and internal committee dynamics.