Morgan Stanley economists say surging oil prices and persistent inflation could delay Federal Reserve rate cuts. Chief U.S. Economist Michael Gapen stated the Fed is likely to proceed with caution, pushing expected cuts from June and September to September and December.
Gapen cited renewed upward pressure on headline inflation, suggesting it will take longer for the Fed to confirm disinflation is underway. Policymakers remain focused on price stability despite a slowing labor market.
Colleague Matthew Hornbach, Global Head of Macro Strategy, sees potential in fixed income markets. He noted that U.S. Treasuries may serve as effective hedges against riskier assets and could perform well if rate cuts are delayed.