JPMorgan has revised its forecast for the Federal Reserve, now expecting a 25-basis-point rate increase at both the September and December meetings. This shift in outlook is driven by trends in core inflation as measured by the Personal Consumption Expenditures price index. Michael Feroli, the firm's chief US economist, noted in a Friday research report that "the case for a rate hike next week is straightforward, as core PCE inflation has exceeded 3% every month this year and has shown little recent progress toward converging to the 2% target."

In late July, JPMorgan had predicted a December move but also indicated that a September action was possible if inflation data came in too hot. Feroli elaborated that "setting aside the midterm elections, a reasonable argument for skipping the October meeting is the need to observe the effects of the rate increases on the economy." He added that "inflation still appears to be driven by supply-side shocks, so we do not expect the tightening cycle to extend into next year."

The stronger-than-expected rise in the US core CPI has reinforced the rationale for tightening, with market expectations for a rate hike now surging to a 90% probability.