JPMorgan Chase: The Fed will only take tightening action if inflation returns to or exceeds 4%

 JPMorgan's market team believes that inflation data is more likely to heat up than cool down. Nevertheless, they believe that this week's hotter data is unlikely to derail the risk appetite tone, and investors are unlikely to be fixated on a single data point, as there is still one CPI data release before the December Fed meeting. However, the team reminds investors that Powell has shifted the Fed's focus from the labor market to balancing dual mandates of employment and inflation. "If CPI or even retail sales data show a stronger growth trajectory and also stimulate inflation, then we need to pay attention to what will happen in the future."

In JPMorgan's view, investors are unlikely to turn to a cautious investment portfolio stance until they see the overall CPI annual rate reach 3.5% (which is a credible threat to the Fed). They believe that only when the inflation rate returns to or exceeds 4%, will the Fed take tightening action.