• JPMorgan Chase expects the US Federal Reserve to cut interest rates by 25 basis points in September.
  • The bank forecasts August CPI at 2.9% year-over-year and core CPI holding at 3.1%.
  • A significantly hotter inflation print could delay the cut to October or December and trigger a sharp sell-off in equities.

JPMorgan Chase, the largest US bank by assets, is positioning for a Federal Reserve rate cut next month, a move that would mark a pivotal shift in monetary policy. The firm’s economists project a 25 basis point reduction in September, according to an internal analysis, betting that the Fed will look through potential near-term noise in inflation data.

The call hinges on the upcoming August Consumer Price Index report. JPMorgan forecasts headline CPI to come in at 2.9% year-over-year, with core CPI—which excludes volatile food and energy prices—holding steady at 3.1%. This would represent enough progress for the Fed to begin its easing cycle, sources familiar with the matter indicated.

However, the bank is also flagging significant risks. If the monthly core CPI reading surprises to the upside, printing at 0.40% or higher, the calculus changes entirely. In such a scenario, the firm believes the Fed would likely delay the first cut, pushing it to either October or even December. The market implications would be immediate and severe; JPMorgan’s trading desk models suggest a core CPI print at that level could trigger a 1.5% to 2% drop in the S&P 500.

Even a reading in the 0.35% to 0.40% range could spur losses of 0.5% to 1% for the benchmark index. Conversely, a soft print below 0.25% could fuel a rally of 1.25% to 1.75% as traders price in a more aggressive easing path.

The analysis underscores the extreme data dependency of markets and the Fed itself. Each inflation print is now treated as a binary event capable of swinging asset prices dramatically. This comes at a time when JPMorgan itself is demonstrating resilience; the firm posted a firm-wide net income of $15 billion in Q2 2025, though that figure was down year-over-year due to outsized gains from its Visa shareholding in the prior-year period. Its payments division, a key growth engine, saw revenue climb 4% to $4.7 billion in the quarter.

Despite the tactical bullishness, JPMorgan’s team is warning clients of crosscurrents from inflation, jobs data, and trade tensions that could easily upend the base case. The firm did not immediately respond to a request for further comment on its Fed forecast.