Fed Shouldn’t Do a 50Bps Rate Hike, JPM’s Kelly Says

Bloomberg reports that JPMorgan's Kelly has argued the Federal Reserve should not deliver a 50 basis point rate hike. The core transmission channel is the policy-rate path: a smaller hike would moderate the pace of front-end yield repricing and narrow the upward pressure on short-dated Treasury yields, which tends to ease the discount-rate headwind for rate-sensitive equities and reduce dollar strength. JPMorgan's own shares are the directly exposed asset, since bank earnings are sensitive to the net interest margin, the shape of the yield curve, and expectations for credit losses as financing costs rise. Traders should watch the next Consumer Price Index release and the Fed's subsequent policy statement and dot plot, which will show whether officials are signaling a slower hiking cadence or sticking with aggressive tightening.

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