David Kelly – Asset Management Chief Global Strategist for JP Morgan Chase – said it’s time for the Federal Reserve to quit hiking interest rates if it wants to keep the U.S. economy intact.
Having “won” its war against inflation, the analyst claimed that the central bank now risks tipping the economy into a recession.
Too Many Hikes
In an interview with Bloomberg on Thursday, Kelly predicted that the Fed will continue raising interest rates beyond February, and into their March and May meetings. These raises, predicted at 25 basis points each, would bring the Fed’s benchmark rate to over 5 – a level Kelly expects the Fed to hold until the year’s end.
“The question is: will the economy be strong enough to allow them to hold rates at that relatively high level?” asked Kelly.
Federal Reserve Chairman Jerome Powell has repeatedly emphasized the Federal Reserve’s commitment to slowing down inflation through continued rate hikes – even if it causes some economic pain. However, he has also noted that labor market strength leaves the United States prepared to endure tighter monetary policy.
Likewise, Kelly noted that the economy remains at “full employment” with “very little demographic growth.” However, the savings rate remains low due to various “government handouts” incentivizing consumers to spend beyond their means.
