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

• Core PCE printed at 130.66 in July 2026 (90.9th percentile for the trailing year) while the 10-year Treasury yield hit a 52-week high of 4.79%, signaling persistent inflation and market stress.
• Manoukian argues the Fed is using inflation tolerance to drive nominal GDP growth and improve the debt-to-GDP ratio, calling it the 'least politically costly policy' despite household impacts like elevated mortgage rates.
• Newmont, the world's largest gold producer with $137.4 billion market cap, reported Q2 2026 adjusted EPS of $2.10 (beating consensus) with record realized gold prices of $4,414 per ounce and record free cash flow of $2.21 billion as a beneficiary of this inflationary regime.

Summary

Key Thesis: Jacob Manoukian, Head of U.S. Investment Strategy at JPMorgan Private Bank, stated on September 3, 2026, that the Federal Reserve has effectively abandoned its 2% inflation target, choosing to tolerate higher inflation rather than bear the economic cost of forced reduction.

Critical Data Points:

• Core PCE printed at 130.66 in July 2026 (90.9th percentile for trailing 12 months)
• Headline CPI reached 332.8, near cycle highs
• 10-year Treasury yield closed at 4.79% on September 2, 2026 (52-week high)
• Gold spot price: approximately $4,477/ounce

Rationale: Manoukian argues the Fed is prioritizing nominal GDP growth to improve the debt-to-GDP ratio, making higher inflation politically preferable. He cited Japan as a template, though noted the U.S. lacks Japan's shrinking labor force and domestic bond buyers willing to accept negative real yields.

Featured Company - Newmont Mining:

• Market cap: $137.4 billion (world's largest gold producer)
• Q2 2026: Adjusted EPS $2.10 (beat consensus $1.98)
• Revenue: $6.12 billion (up 16% YoY)
• Realized gold price: record $4,414/ounce vs. $3,320 prior year
• Free cash flow: record $2.21 billion
• Repurchased over 100 million shares

Market Implications: The analysis suggests fixed-income portfolios built for 2% inflation are mispriced. Assets with earnings power scaling with price levels (like gold) are favored over fixed-coupon instruments. Manoukian views this as supportive for equities expecting continued earnings growth, though warns nominal growth partially reflects price-level illusion.

Risks: Thesis breaks if Core PCE reaccelerates forcing rate hikes or Treasury auctions fail significantly.