December 3, 2022
  • December 3, 2022

JPMorgan economists conjure up God in chilling research

By on June 19, 2022 0

This post originally appeared on Tker.co.

JPMorgan’s Global Economic Research Team has just published a note entitled: “They will know that I am the lord when I take revenge on them.”

The quote is from Ezekiel 25:17. It was popularized in “Pulp Fiction” by fictional hitman Jules Winnfield – played by Samuel L. Jackson – who recited the verse before sending his marks.

Led by Bruce Kasman, JPMorgan’s economics team uses terrifying language to characterize the Federal Reserve’s “resolutely hawkish turn” in the wake of recent reports of hotter-than-expected inflation.

JPMorgan’s Global Economic Research Team has just published a note entitled: “They will know that I am the lord when I take revenge on them.”

(Source: MovieClips/YouTube)

The quote is from Ezekiel 25:17. It was popularized in “Pulp Fiction” by fictional hitman Jules Winnfield – played by Samuel L. Jackson – who recited the verse before sending his marks.

Led by Bruce Kasman, JPMorgan’s economics team uses terrifying language to characterize the Federal Reserve’s “resolutely hawkish turn” in the wake of recent reports of hotter-than-expected inflation.

While downside risks to the economy have intensified, economists believe “central bankers have not completely abandoned the expansion. While the Fed should act forcefully to contain inflation, we expect it to become more sensitive to growth disappointments once rates hit 3% later this year. How quickly the expected mix of tight policy, moderating inflation and slowing job growth will end this phase of tightening has become harder to gauge and will be a key determinant of how long this phase will last. expansion.

The Fed hurts

TKer readers may have noticed that the tone of recent newsletters has taken a slightly darker turn. (See here and here. Tomorrow’s weekly edition won’t be much rosier.)

It started after May’s Consumer Price Index report, which suggested that inflation had not peaked earlier this year. Rather, it suggested that inflation was getting worse, despite months of monetary policy tightening. On the same day as the CPI report was released, the June consumer sentiment report from the University of Michigan showed that inflation expectations also continued to deteriorate.

The news spooked many who expected inflation to improve. Above all, it spooked the Federal Reserve, which reacted on Wednesday by raising its target interest rate by an all-time high of 75 basis points.

“The worst mistake we could make would be to fail,” Fed Chairman Jerome Powell said Wednesday. “We need to restore price stability. We really do… It’s the foundation of economics. If you don’t have price stability, the economy really won’t work the way it should.

Simply put, the Fed seems determined to lower inflation. And as Powell has already said, “there could be difficulties in restoring price stability.”

The bottom line

I am of the opinion that the economy and the stock market are biased upwards over the long term. We have a long history of recessions, depressions, geopolitical conflicts, financial crises, pandemics and even inflation fears. And yet, the economy and the stock market have never failed to recoup the losses and come back even stronger. (Learn more here.)

But in the short term, everyone has to manage their expectations. This is not the kind of environment in which to expect a sustained rally in stock prices. The Fed has made it clear that it will continue to actively pressure financial markets until it sees “clear and convincing” evidence that inflation is falling.

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Sam Ro is the founder of Tk.co. Follow him on Twitter at @SamRo

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