Halister News

(Bloomberg) -- The Fed is seen as hiking rates three times in 2018 vs a previous forecast of four because core PCE will be lower than expected, Morgan Stanley economists and strategists including Ellen Zentner and Matthew Hornbach said in a note.

• “Various forces are eating away at inflation” and offsetting the progress made by a tight labor market
  • MS now sees annual growth in core PCE ending 2017 at 1.4% y/y and 2018 at 1.7% y/y; both forecasts ~0.2ppt lower than previous
• Recent inflation declines aren’t just “idiosyncratic,” but reflect broader trends that should persist and make it harder to reach Fed’s 2% inflation goal
  • Factors that have depressed inflation and are likely to do so in medium term include rising use of technology, domestic oversupply, “structural bull market” for USD and falling inflation expectations

To contact the reporter on this story: Vivien Lou Chen in San Francisco at vchen1@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Greg Chang