Morgan Stanley says the Federal Reserve will cut, not ‘if but when’

Morgan Stanley, in a note on Monday, says its confidence that inflation will fall this year.

The CPI for April is due on Wednesday:

• the bar for ever more hawkish surprises is getting higher

• the “most crucial CPI reading of 2024”, a “mini Super Bowl”

And PPI before that on Tuesday:

• Can’t wait for the US CPI data Tuesday will bring PPI data (and a surprise from the Fed)

But, says MS on the CPI:

• “While Wednesday’s report will be critical for the timing of the first cut, regardless of the print, we remain confident that inflation will trend lower over the year, making the question when, not if, the Fed will cut

MS add that the timing of the first cut is still an open question but the the path for the year is unlikely to change too much.

• “Weaker monthly prints ahead with faster disinflation starting in 2H24 should provide the Fed the confidence it needs that inflation is on a sustained path toward target”
• “We remain bullish the Fed will cut three times this year — but starting in September rather than July — with two more cuts in November and December”

This article was written by Eamonn Sheridan at www.forexlive.com.