MORGAN STANLEY has shifted to a more hawkish outlook and now forecasts two 25bps
Federal Reserve hikes — at the Sept. 15-16 meeting and in December — citing
persistent inf and recent data that surprised to the upside. The bank also
expects the ECB to tighten again; its call comes as the Fed and the Bank of
Japan make policy decisions this week and after the ECB resumed tightening days
earlier. In a Monday note it said the disinflation process looks slower and less
convincing than policymakers may require, and that signs of energy second-round
effects, strong AI-linked investment demand, a possibly temporarily higher
neutral rate and credibility concerns tilt the risk balance modestly toward
tighter policy, though both hikes and pauses remain plausible.
