Morgan Stanley on their inflation outlook, a huge shift lower according to their forecast.
- US CPI is currently 7.7%Y, but we forecast it to be under 2.0%Y by the end of next year.
MS cite 5 reasons that'll cool inflation:
- Global demand should be weaker;
Supply chains are showing much less stress;
Inventories look increasingly elevated, inviting discounting for core goods;
Risk in shelter prices is much more balanced; and
Base effects shift materially (US gas prices are up 11%Y, but will be down 11%Y by March at current prices)
MS' Fed projection:
- we think that the Fed pauses after a January rate hike at 4.625%
And, the European Central Bank:
- ECB pauses in March at 2.50%