JPMorgan now expects the Federal Reserve to hike interest rates for 9 straight meetings, posing a major risk to markets

• JPMorgan now expects the Federal Reserve to hike interest rates for nine meetings in a row.
• The bank's analysts also said that rapidly rising interest rates are the biggest danger to markets.

JPMorgan now expects the Federal Reserve to hike interest rates for nine consecutive meetings as the central bank grapples with the strongest inflation in 40 years.

Central banks hiking interest rates more quickly than investors previously expected is now the most significant threat to otherwise healthy markets and economies, analysts at the bank said in a note this weekend.

The analysts, led by chief economist Bruce Kasman, said they now think the Fed will raise rates by 25 basis points (0.25 percentage points) at every meeting until March 2023 – nine hikes in total.

The federal funds target rate – the Fed's main interest rate – currently stands at a record low of between 0% and 0.25%. Nine straight 25 basis point hikes would take the rate to 2.25% to 2.5%.

Much of Wall Street expects the Fed to start raising interest rates in March, with most analysts expecting five or six hikes in 2022. Raising interest rates makes borrowing more expensive and aims to reduce spending and demand, hopefully cooling inflation.

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JPMorgan said recent inflation reports had come in considerably higher than expected. That's caused a rethink among the bank's economists, who no longer expect price rises to slow down this quarter.

"These developments align with the hawkish signals from central banks, and we have accelerated projected policy rate normalization paths in response," Kasman and colleagues wrote.

However, they said that more rapid and sustained central-bank action posed a danger to markets and economies.

"We think the risk that central banks shift and perceive a need to generate slow growth — and the corresponding impact on global financial conditions — is now the most significant threat to an otherwise healthy global backdrop."

Global stocks have fallen sharply in 2022 already, largely because investors have rapidly revised up their expectations for the number and pace of Fed interest rate hikes. The S&P 500 was down 8.8% for the year as of Friday's close, with the Russia-Ukraine crisis causing further volatility.