Stronger-than-expected U.S. core inflation has reinforced expectations of further monetary tightening, with market-implied odds of a Federal Reserve rate increase rising to 90%.

JPMorgan now expects the Fed to raise interest rates by 25 basis points in both September and December. Michael Feroli, the bank’s chief U.S. economist, said core personal consumption expenditures inflation has remained above 3% every month this year, with little recent progress toward the Fed’s 2% target.

Feroli said the Fed may skip October to allow more time to assess the economic impact of the September increase. Because inflation still appears to be driven largely by supply shocks, JPMorgan does not expect the rate-hike cycle to continue into next year.

Citi also revised its forecast and now expects a 25-basis-point increase in September. Economists Andrew Hollenhorst and Veronica Clark said stronger-than-expected core inflation in August, along with renewed increases in energy prices, could be enough to build consensus for a rate hike at the upcoming Federal Open Market Committee meeting.

Citi expects the Fed to hold rates steady until June 2027 and then cut rates three times by the end of that year as inflation eases. The bank had previously expected a weakening labor market to prompt rate cuts this year.