Morgan Stanley warns that April's Consumer Price Index (CPI) will show elevated inflation, driven by a massive surge in energy costs from the US-Iran conflict.
March inflation hit 3.3%, up from 2.4% in February, fueled by a 12.5% jump in energy prices. The monthly gasoline price spike is the largest since 1967.
With no ceasefire in sight, markets see only a 2.6% chance of a Fed rate cut by June 2026, down from 2% a day ago. The outlook for September stands at 22.1%.
Analysts expect the Federal Reserve to hold steady as persistent inflation and geopolitical uncertainty weigh on the economy.