David Kelly, Chief Global Strategist at JPMorgan Asset Management, said the Federal Reserve should keep interest rates unchanged and predicted that inflation will gradually decline as evidence builds against a sustained US wage-price spiral.

"Absolutely they should stay on hold, and I actually think they will," Kelly said Wednesday in a Bloomberg Television interview following the release of July consumer price data.

The July CPI report showed subdued underlying US inflation, while US Treasuries held their gains after the release. The response in bond markets reflected investor positioning ahead of the Fed's next policy decisions, with cooler inflation readings typically strengthening expectations that the central bank can afford to maintain its current stance.

Kelly's comments come amid ongoing debate about the trajectory of Federal Reserve monetary policy. The Federal Reserve's Federal Open Market Committee (FOMC) sets the target range for the federal funds rate, which serves as a benchmark for borrowing costs throughout the US economy, influencing everything from mortgage rates to corporate credit. The FOMC meets eight times per year to assess economic conditions and determine whether adjustments to the rate are warranted. Market participants closely parse each CPI release, along with employment data and the Fed's own Summary of Economic Projections, for signals about the timing and direction of potential rate moves.

The concept of a wage-price spiral refers to a situation in which rising prices lead workers to demand higher wages, which in turn raises business costs and pushes prices even higher, creating a self-reinforcing cycle of inflation. Kelly's assessment suggests that the July data provides further evidence that such a dynamic is not taking hold in the US economy. This distinction matters because a sustained spiral would complicate the Fed's efforts to return inflation to its 2% target without significantly tightening policy further, whereas its absence supports the case for patience as inflation cools organically.

The Consumer Price Index (CPI), released monthly by the US Bureau of Labor Statistics, tracks changes in the prices paid by urban consumers for a representative basket of goods and services. Core CPI, which excludes volatile food and energy components, is closely watched by policymakers and market participants as a gauge of underlying inflation trends. Incoming labor market data, including monthly payroll and wage growth figures from the BLS, will serve as additional inputs the FOMC weighs alongside future CPI prints at its upcoming meetings.