J.P. Morgan Still Expects a Quarter-Point Fed Hike in December, Not a Long Hiking Cycle
J.P. Morgan Global Research still expects the Federal Reserve to lift its 3.75% to 4.00% range by a quarter point in December, but not to start a longer-term hiking cycle.
For American borrowers, the call means one more step up in short-term rates before the year is out, but not the start of a longer climb. In The Edge’s reading, the bank is standing at the Committee’s own centre of gravity: in September, 12 of 18 policymakers pencilled in exactly one more increase by year-end, and October’s statement left that path open without committing to it.
The Federal Open Market Committee kept its target range unchanged on 28 October, with two members voting against, as set out in The Edge’s report that day. Governor Lisa Cook and Beth Hammack of the Cleveland Fed preferred a quarter-point increase.
The Bank Sees December as One Step, Not the Start of a Run
Michael Feroli, the bank’s chief US economist, reads the October statement as a hawkish bias that keeps December live for the next move. “We continue to expect a hike at the December FOMC meeting,” he said.
The bank had flagged sticky inflation going into the October meeting. Business surveys, the pass-through of energy costs and import prices all suggest core inflation could remain firm in the near term, Feroli said in the note of 3 November.
The bank does not see December opening a longer series of increases. Its note adds that the five task forces Chair Kevin Warsh set up in the summer to review policymaking, expected to report by the end of 2026, are not expected to change its baseline forecast for rates.
Its economists also expect any significant change to the policy framework to need broader buy-in from the full Committee. Because the task forces are the chairman’s rather than systemwide efforts, they say turning their recommendations into policy may be gradual.
The year’s votes show how far the debate has travelled. The range stayed at 3.50% to 3.75% from January to July. Dissenters in January and March wanted a cut; in April one member wanted a cut while three objected to an easing bias in the statement. By July three members wanted an increase, and in September the Committee voted 12 to 0 for its first increase of the year.
FOMC decisions, June to October 2026
| Meeting | Range (%) | Vote |
|---|---|---|
| June | 3.50 to 3.75 | 12 to 0 |
| July | 3.50 to 3.75 | 9 to 3 |
| September | 3.75 to 4.00 | 12 to 0 |
| October | 3.75 to 4.00 | 10 to 2 |
Target range for the federal funds rate after each meeting; votes as printed in each statement. Every dissent in July and October favoured a quarter-point increase; Beth Hammack dissented at both meetings.
Strategy Meetings Could Lengthen Some Gaps Between Decisions
Warsh also told his press conference on 28 October, as set out earlier on this site, that the Committee will keep eight meetings a year, with a change to its schedule starting in autumn 2027. In 2027 one meeting “will focus exclusively on broad monetary policy strategy,” with neither a vote on the federal funds rate nor a policy statement expected, he said. He expects two meetings dedicated to strategy in 2028 and six for setting policy.
Asked what the Fed would publish after those meetings, he said he did not expect any policy decision or statement from them, and that what they produce is not yet clear. He added that there was more news to come and that the Fed would share the details as it had them.
The bank’s economists estimate that, if nothing else in the schedule changes, one or two gaps between policy meetings will stretch to 12 or 13 weeks, which they say makes getting the calibration right at those meetings more important. The Fed’s calendar for 2027 still lists eight meetings, none yet marked as the strategy meeting, and each date is tentative until confirmed at the meeting before it.
The Committee’s Own Projections Leave Room for One More Move
The median policymaker in September put the federal funds rate at 4.1% for the end of this year, up from 3.8% in June. Measured at the midpoint of the range, the rate is 3.875% today, and a quarter-point increase would take it to 4.125%, the value behind that median.
The spread of views matters as much as the median. There were 18 projections for the end of 2026. Twelve sat at 4.125% and four at 4.375%, a level that needs two more increases; only two left the rate where it is now.
With October gone, the meeting of 8 and 9 December is the only one left this year, so the four highest projections would now need a half-point move if those participants’ views are unchanged. On the same chart, 16 of the 18 saw at least one more increase.
The median for 2027 is also 4.1%, unchanged from this year’s. It then eases to 3.9% the year after and 3.2% in the longer run. That path is broadly consistent with one more increase and no further climb, close to the bank’s view, though eight of the 18 put the end-2027 rate at 4.375%, above that median.
The projections are each participant’s judgment of appropriate policy, conditional on the outlook, rather than a Committee decision.
Median federal funds rate projections (in %)
| Year | September | June |
|---|---|---|
| 2026 | 4.1 | 3.8 |
| 2027 | 4.1 | 3.6 |
| 2028 | 3.9 | 3.4 |
| Longer run | 3.2 | 3.1 |
Median of participants’ projections of the midpoint of the target range at the end of each year, Summary of Economic Projections of 16 September 2026 and 17 June 2026.
Where policymakers placed the end-2026 rate in September
| Midpoint (%) | Count | Path |
|---|---|---|
| 4.375 | 4 | Two more increases |
| 4.125 | 12 | One more increase |
| 3.875 | 2 | No change |
Individual projections of the midpoint at the end of 2026, rounded to the nearest eighth of a point. The path column measures each projection against the 3.875% midpoint set in September.
Headline Inflation Runs Ahead of Core Measures
The September consumer price figures, set out earlier on this site, showed annual inflation at 3.7%, up from 3.4% in August. Gasoline rose 9.1% in the month and accounted for more than half of the monthly increase in the all items index.
Excluding food and energy, consumer prices rose 2.6% on the year. The gap between the headline and core rates widened to 1.1 percentage points from 1.0 in August. Energy prices were 20.4% higher than a year earlier.
The Fed’s inflation goal is set on a different gauge, the personal consumption expenditures price index, which rose 3.6% in the year to September, with the core measure at 3.1%. Both readings, also set out earlier, are changes over 12 months.
Policymakers’ September medians for this year, 3.7% and 3.4%, measure the change from the fourth quarter of 2025 to the fourth quarter of 2026, so the comparison is indicative only; on that basis both latest readings sit below the medians, the core gap being the wider.
On The Edge’s calculation, a simple ex post real policy rate, the 3.875% midpoint less September’s annual PCE inflation, stands at 0.28 percentage points. A December increase would lift it to 0.53 points on the same inflation reading, and the margin against core PCE is already 0.78 points.
Latest readings against the September projections for 2026 (in %)
| Measure | Latest | Projected |
|---|---|---|
| PCE prices | 3.6 | 3.7 |
| Core PCE prices | 3.1 | 3.4 |
| Unemployment rate | 4.2 | 4.1 |
Latest: 12 months to September 2026 for prices, September 2026 for unemployment. Projected: September median; price projections run from the fourth quarter of 2025 to the fourth quarter of 2026, and unemployment is the fourth-quarter average.
The labour data are more mixed than the bank’s description of a resilient job market. Payrolls rose 29,000 in September. Revisions turned July into a fall of 10,000 and cut August’s gain to 133,000.
Across the three months to September, the average gain was 51,000. Unemployment stood at 4.2% in September, above the 4.1% that policymakers projected for the final quarter of the year.
What to watch: the US Bureau of Labor Statistics publishes the October jobs report on 6 November at 13:30 GMT. October consumer prices follow on 10 November at 13:30 GMT.
The US Bureau of Economic Analysis releases October personal income and outlays, including the PCE price index, on 25 November at 13:30 GMT. The Committee meets on 8 and 9 December, with new economic projections.
J.P. Morgan Global Research’s forecast and its economists’ views are from its note “What’s the Fed’s next move?” of 3 November 2026; decisions, votes and projections are from the FOMC statements of January to October 2026 and the Summary of Economic Projections of 16 September 2026; Chair Kevin Warsh’s remarks on strategy meetings are from the Federal Reserve’s preliminary transcript of his press conference of 28 October 2026; data are from the BLS releases of 2 and 14 October 2026 and the BEA release of 29 October 2026; percentages, differences, counts and averages not attributed to a source are The Edge’s calculations.
Sources: J.P. Morgan Global Research, Federal Reserve, US Bureau of Labor Statistics, US Bureau of Economic Analysis, The Edge.
