Powell Talks “Rate Cuts Don’t Need 2% Inflation,” While Wall Street Worries About Core Inflation Overshoot

Morgan Stanley believes the stickiness of US inflation has dissipated. PCE inflation may fall below 2% in the second half, and the argument for higher equilibrium inflation has vanished. Investors may worry if policy is too tight, predicting the Fed might cut rates seven times in the next year. However, if Trump returns to the White House and the Republicans gain control, inflation could rebound.