JPMorgan chief U.S. economist Michael Feroli believes the Federal Reserve “will have to do more to restrain labor demand.” He continues to look for a 75 basis point interest rate hike next week, and now expects a 50 basis point move in November, up from 25 basis points previously. Feroli continues to look for a 25 basis point hike in December and now sees that followed up by another 25 basis point move at the January-February meeting, taking the terminal target rate to 4.25%. “We believe the Fed will need to continue tightening policy until they are confident that some slack is coming back into the labor market,” Feroli writes in a note to investors. He believes that later this year, the Federal Open Market Committee “will seek an off-ramp to smaller 25bp increments to reduce the risk of over-shooting.”
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