JPMorgan strategist claims Fed has surrendered on 2% inflation

JPMorgan’s top fixed-income executive has a blunt message for anyone still waiting for the Federal Reserve to wrestle inflation back to its official target: stop waiting.

Bob Michele, the bank’s Chief Investment Officer for Global Fixed Income, Currency, and Commodities, told Bloomberg Television that the Fed’s 2% inflation target has become a “myth” in the eyes of financial markets. The US hasn’t actually hit 2% in more than five years.

The new number is 2.5%

“We haven’t been there in half a decade,” Michele said during an April 9 appearance. “Two and a half feels like the new 2%.”

Michele backed it up with JPMorgan’s own forecasts, projecting headline and core inflation will land between 3% and 3.5% for 2026, with real GDP growth running at roughly 2.25%.

Michele isn’t a lone voice inside JPMorgan’s research apparatus. David Kelly and Jacob Manoukian, both senior strategists at the bank, have made similar arguments throughout 2026. They’ve coined the term “Teflon inflation” to describe the current environment, one where prices stay elevated but refuse to trigger the kind of wage-price spiral that would force the Fed into aggressive action.

The Fed says otherwise

Fed Chair Kevin Warsh has not been ambiguous about this. In multiple public addresses throughout 2026, Warsh has firmly rejected any suggestion that the central bank is softening its inflation objective. The 2% PCE target, he has insisted, is not flexible, not aspirational, and not up for quiet renegotiation.

Headline CPI hit 4.2% year-over-year in May 2026, driven partly by energy costs. Core inflation readings have persistently hovered near or above 3% across multiple reports this year. Core Personal Consumption Expenditures, the Fed’s preferred gauge, has been running around 3.3%.

JPMorgan’s strategists aren’t the only prominent voices raising this question. Bill Ackman flagged the issue back in January 2026, suggesting that structural forces would prevent a clean return to 2%. Jeffrey Gundlach made a similar case in July, pointing to AI-driven capital expenditure, persistent government deficits, and geopolitical friction as forces that keep a floor under prices. Both have suggested the Fed may drift toward a de facto target in the 2.5% to 3% range, whether or not it ever says so publicly.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.