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May 13 - 12:55 PM

Morgan Stanley: All Focus on US CPI Print on Wed; What to Expcet?

By eFXdata  —  May 13 - 10:45 AM

Synopsis:

Morgan Stanley discusses the highly anticipated US CPI release scheduled for Wednesday at 8:30 am New York time, emphasizing its critical role in shaping Federal Reserve rate cut expectations amidst evolving inflation trends.

Key Points:

  • Market Focus: Global markets are keyed in on the upcoming CPI data, which will play a crucial role in determining the timing of the Fed's rate cuts, previously adjusted from an aggressive seven cuts to a more cautious two, with the first expected no earlier than September.
  • Inflation Trends: Morgan Stanley predicts a 0.29% month-over-month increase in core CPI, with expectations for gradual declines in rent inflation and a slight decrease in core goods prices. There is also an anticipated mild correction of previously high services inflation.
  • Impact of CPI Data: While the April CPI data is crucial, Morgan Stanley believes it won’t dramatically alter the expected disinflationary trend for the year. Any deviations from their forecast could shift market expectations for the timing of Fed rate cuts, either earlier or later.

Conclusion:

Morgan Stanley maintains a confident outlook that inflation will continue to decrease throughout the year, leading to eventual rate cuts by the Fed. The firm underscores that the key indicators mostly point towards continued disinflation, suggesting that significant changes to the overall monetary policy path for the year are unlikely, regardless of the upcoming CPI outcomes.

Source:
Morgan Stanley Research/Market Commentary

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