David Kelly – Asset Management Chief Global Strategist for JP Morgan Chase – said it’s time for the Federal Reserve to quit hiking interest rates if it wants to keep the U.S. economy intact. 

Having “won” its war against inflation, the analyst claimed that the central bank now risks tipping the economy into a recession. 

Too Many Hikes

In an interview with Bloomberg on Thursday, Kelly predicted that the Fed will continue raising interest rates beyond February, and into their March and May meetings. These raises, predicted at 25 basis points each, would bring the Fed’s benchmark rate to over 5% – a level Kelly expects the Fed to hold until the year’s end. 

“The question is: will the economy be strong enough to allow them to hold rates at that relatively high level?” asked Kelly. 

Federal Reserve Chairman Jerome Powell has repeatedly emphasized the Federal Reserve’s commitment to slowing down inflation through continued rate hikes – even if it causes some economic pain. However, he has also noted that labor market strength leaves the United States prepared to endure tighter monetary policy. 

Likewise, Kelly noted that the economy remains at “full employment” with “very little demographic growth.” However, the savings rate remains low due to various “government handouts” incentivizing consumers to spend beyond their means. 

“What we know for sure is the economy is gonna be growing slowly,” he said. “If we stop increasing volume as much, that’s going to slow consumer spending.”

In tandem with the dollar’s global strength and weak residential construction, Kelly sees a slowed economy as a certainty. “I think we get no more than 1 to 1.5% growth at best – but we could still avoid a recession.” 

The Stakes of the Fed’s Decision

The Federal Reserve’s decisions weigh heavy on the crypto industry– affecting digital asset prices and jobs alike. As such, analysts and leaders like Arthur Hayes and Mike Novogratz have been eagerly waiting for the Fed to “flinch” in the face of worsening market conditions, thus dropping interest rates again, and marking a market bottom. So far, that moment hasn’t arrived.

December’s inflation report clocked in at 6.5% on Thursday, showing signs that the Fed’s war against rising prices is paying off. 

The United Nations petitioned the Fed to stop raising interest rates in October for fear of sparking a global recession, impacting developing countries.