HALISTER1: TIPS Breakevens Could Widen on Fed’s Inflation Assessment: MS

TIPS Breakevens Could Widen on Fed’s Inflation Assessment: MS

(Bloomberg) -- TIPS breakevens could widen slightly if FOMC’s Nov. 1 policy statement says that survey-based measures of longer-term inflation expectations have slipped, Morgan Stanley strategists Matthew Hornbach and Guneet Dhingra said in note.
  • Investors could be “caught off guard” if there’s any change to Fed’s assessment of inflation expectations
    • MS economists don’t expect such a change, but “we see a risk that FOMC participants may want to back up their claim that they are watching inflation closely”   
  • Rates markets aren’t yet focused on next week’s statement partly because investors don’t expect meaningful changes in the language
    • Investors are instead “consumed by uncertainty” over who next Fed chair will be and prospects for tax reform
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: Benjamin Purvis at bpurvis@bloomberg.net Greg Chang

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Guneet Dhingra (Morgan Stanley & Co LLC)
Matthew Hornbach (Morgan Stanley & Co LLC)

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