Morgan Stanley Sees Sticky Inflation as Oil Prices Keep Hiking

Morgan Stanley has revised its forecast for US inflation, citing higher oil prices as a key factor. The bank now expects core PCE (Personal Consumption Expenditures) inflation to end the year at 3.2%, up from its previous forecast.

This adjustment reflects Morgan Stanley's belief that rising oil prices have a ripple effect on other costs, such as shipping and input costs, which can be passed on to consumers through higher prices.

The bank's revised forecast also suggests that the Federal Reserve may need to keep interest rates high for longer, with two more quarter-point hikes expected in 2024. This would maintain borrowing costs at elevated levels throughout 2027, potentially weighing on economic growth.