JPMorgan Chase's U.S. interest rate strategy team, led by Jay Barry and Molly Herckis, has shifted its forecast for the next Federal Reserve rate hike from the second half of 2027 to December of this year, according to a report dated July 31. The bank now expects the policy rate to remain unchanged in the 3.75%-4.0% range thereafter.

The report noted that if inflation quickly rises again, a September rate hike is also a risk. "We expect the U.S. July unemployment rate to edge up to 4.3%, with nonfarm payrolls adding 75,000 jobs," the strategists wrote. Comments from Fed Chair Warsh suggest that balance sheet policy could play a larger role, and the commitment to the 2% inflation target may weaken. The risk of further bearish steepening of the yield curve is rising, and JPMorgan Chase recommends establishing a steepening trade in the 2-year/10-year Treasury yield curve.

JPMorgan Chase has also raised its forecast for the U.S. 10-year Treasury yield at the end of 2026 to 4.85%, up from 4.70%, and increased its 30-year Treasury yield target to 5.40% from 5.20%. The bank stated that this adjustment primarily reflects its renewed optimism on breakeven inflation rates and an expected rise in term premiums.