JPMorgan Chase: The Federal Reserve will only take tightening actions if the inflation rate returns to or exceeds 4%

JPMorgan's market team believes that inflation data is more likely to see a warming up than a cooling down. That said, they believe hotter data this week is unlikely to derail the risk appetite tone, and investors are unlikely to fixate on one data point as there is one more CPI data out before the December Fed meeting.” However, the team reminded investors that Powell has shifted the Fed's focus from the labor market to weighing the dual mandate of employment and inflation. “If data such as CPI or even retail sales show a stronger growth trajectory that is also fueling inflation, then we need to keep an eye on what's coming.” In JPMorgan's view, investors are unlikely to shift to a cautious portfolio stance until they see the headline CPI reach 3.5% per annum, which is a credible threat to the Fed. They believe the Fed will only take tightening action if inflation returns to or exceeds 4%.