JPMorgan’s Own Strategist Says the Fed Has Quietly Surrendered on 2% Inflation

JPMorgan’s Own Strategist Says the Fed Has Quietly Surrendered on 2% Inflation

Omor Ibne Ehsan

Fri, September 4, 2026 at 8:41 PM GMT+3 6 min read

• NEM -2.04%

Quick Read

• Newmont's shares surged 75% over the past year as gold hit $4,477 per ounce, making NEM a direct proxy for the Fed's inflation-tolerance regime.

• Manoukian argues driving nominal GDP growth is the least politically costly way for the Fed to shrink the debt-to-GDP ratio while tolerating inflation above 2%.

• A hard core PCE reacceleration forcing a rate hike, or a failed Treasury auction, would signal the Fed's inflation tolerance has a hard ceiling.

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Jacob Manoukian, Head of U.S. Investment Strategy at JPMorgan Private Bank, told CNBC on September 3, 2026, that the Federal Reserve has effectively accepted inflation above its stated target rather than pay the economic price of forcing it back down. A strategist at one of the largest private banks in the country is saying out loud that the 2% inflation target is negotiable, and that is a bigger statement than any rate call, according to JPMorgan Private Bank. If the Fed will not bear the cost of hitting its target, it does not really have that target anymore, and every portfolio built for a 2% return is mispriced.

That reframing is what makes the Manoukian view actionable. It pushes the reader toward assets whose earnings power scales with the price level rather than assets whose coupons are fixed against it. Gold sits at the center of that trade, and Newmont (NYSE:NEM), the world's largest gold producer with a market cap of roughly $137.4 billion, is a prominent large-cap vehicle tied to that view.

Why "Tolerate" Is the Operative Word

Manoukian's framing was direct. "Our overall thesis is that they're willing to tolerate inflation at these levels. They won't find the cost of getting inflation back to the 2% target as being worth it," he said.

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The data supports the diagnosis. Core PCE, the Fed's preferred gauge, printed at 130.66 in July 2026, its high for the trailing year, with the index sitting in the 90.9th percentile of the past twelve months of readings. Headline CPI is at 332.8, near its cycle high.

Manoukian's logic for why the Fed accepts it is arithmetic on the national debt. "You can drive nominal GDP growth. So that seems to be the least politically costly policy. So if you can drive nominal GDP growth higher you can correct the debt to GDP ratio," he said, adding that the trade-off is being "a little more tolerant of inflation."

He offered Japan as a template. That comparison deserves a harder look, because Japan ran the playbook with a shrinking labor force and a domestic buyer base that willingly held its own government paper at negative real yields. The U.S. does not have either.

The bond market seems to sense the difference. The 10-year Treasury yield closed at 4.79% on September 2, 2026, its 52-week high, even as CNBC noted the yield is up only about 5 basis points from the start of August. CNBC also flagged Treasury Secretary intervention in bond markets to keep rates from rising further, which itself signals market stress.

Equities Get a Pass, but Read the Fine Print

Manoukian did not treat the overshoot as bearish for stocks. "In this regime of inflation overshoot it probably means a little bit more elevated bond market volatility. It probably gives the green light to equity investors to expect a continued rally and continued strong earnings growth environment," he said.

The catch is that nominal earnings growth in an inflationary regime is partly an illusion of the price level. Companies whose input costs rise faster than their output prices get squeezed. Companies whose output is priced in the very commodity that hedges inflation see the opposite.

That is Newmont's setup. In Q2 2026, the company reported adjusted EPS of $2.10, beating the $1.98 consensus, on revenue of $6.12 billion, up 16% year over year. Realized gold came in at a record $4,414 per ounce, versus $3,320 in the prior-year quarter. Spot gold trades at roughly $4,477 an ounce as of this writing.

Operating leverage is the key. On the earnings call, CFO Brian Tabolt noted the realized gold price rose about 33% year over year while absolute costs applicable to sales rose just 4%, driving record Q2 free cash flow of $2.21 billion. The Q2 2026 8-K details the flow-through.

Newmont has returned that cash. Management repurchased over 100 million shares, roughly 9% of the count, since February 2024, with $4.3 billion remaining under a $6 billion authorization. Shares are up 75.15% over the past year.

What Would Prove Manoukian Wrong

The thesis breaks on two developments. A core PCE print that reaccelerates hard enough to force a hike would signal that the Fed's tolerance has a ceiling, and long-duration assets would bid up before gold does. A failed or badly tailed Treasury auction would be the other tell, because it would strip the Treasury of the ability to smooth the curve.

CNBC flagged that elevated policy rates keep mortgage rates high and the housing market constrained, which is the household cost of the regime Manoukian describes. For a reader waiting to refinance, the wait extends.

For investors weighing how to interpret Manoukian's view, Newmont offers large-cap exposure to gold, with earnings, buyback capacity, and price leverage that align with an inflation-overshoot regime.

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