Morgan Stanley's Chief U.S. Economist Michael Gapen and Global Head of Macro Strategy Matthew Hornbach offered a clear core assessment of Warsh's Jackson Hole speech: Don't expect Warsh to provide much short-term interest rate guidance in this speech, as he has repeatedly stated that the Fed should reduce communication and forward guidance.
Therefore, Morgan Stanley believes that Warsh is unlikely to focus on: what to do at the September meeting, what the December interest rate will be, how many times to cut or raise rates this year, or short-term balance sheet policy. However, they believe Warsh may use the Jackson Hole platform to begin discussing several longer-term "big issues": ① the Fed's balance sheet ② the inflation framework ③ the Fed's communication style ④ AI and productivity ⑤ the quality of U.S. economic data. These correspond precisely to the working groups Warsh previously established.
Therefore, Morgan Stanley's core prediction can be summarized as: this may not be a speech about "whether or not to cut rates in September," but rather Warsh's first relatively systematic explanation of the direction he wants to take the Fed.
