JPMorgan's chief investment officer for fixed income says the Federal Reserve's 2% inflation target no longer matches market reality, calling it a "myth" after more than five years without a print at that level. The bank's own forecasts point to inflation running well above target through 2026, a view other JPMorgan strategists and outside investors share. Fed Chair Kevin Warsh insists the target itself hasn't moved.
Bob Michele, JPMorgan'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, since the US hasn't hit that level in more than five years.
Two and a half is the new target
During an April 9 appearance, Michele put it plainly. According to Bloomberg Television: "Two and a half feels like the new 2%." He backed the claim with JPMorgan's own forecasts, projecting headline and core inflation between 3% and 3.5% for 2026, with real GDP growth running near 2.25%.
Michele isn't alone inside the bank. David Kelly and Jacob Manoukian, senior JPMorgan strategists, have coined the term "Teflon inflation" to describe prices that stay elevated without triggering the kind of wage-price spiral that would force the Fed into aggressive action.
The Fed pushes back
Fed Chair Kevin Warsh has repeatedly rejected any suggestion that the central bank is softening its inflation objective, insisting the 2% PCE target is not flexible, not aspirational, and not up for quiet renegotiation.
Yet the data gives Michele's case some support. Headline CPI hit 4.2% year-over-year in May 2026. Core Personal Consumption Expenditures, the Fed's preferred gauge, has been running around 3.3%.
Other investors see the same drift
JPMorgan isn't the only voice questioning a clean return to target. Bill Ackman flagged the issue in January 2026, pointing to structural forces working against 2% inflation. Jeffrey Gundlach made a similar case in July, citing AI-driven capital expenditure, persistent government deficits, and geopolitical friction as forces keeping a floor under prices. Both suggested the Fed may drift toward a de facto target of 2.5% to 3%, whether or not it ever says so publicly.
Warsh's public position and JPMorgan's internal forecasts now sit on opposite sides of the same number.
Source: Crypto Briefing
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