The Fed Could Let Economic Slowdown Until Around 2025, Says Morgan Stanley’s Global Chief Economist

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The Fed has hiked interest rates by 300 basis points during its last four meetings in a bid to bring down soaring prices – but inflation has stood stubbornly high, hitting 8.2% in September.

At his latest press conference earlier this week, chair Jerome Powell signaled the central bank would now shift to a ‘slower for longer’ approach to rate hikes.

“It will become appropriate to slow the pace of increases as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our 2% goal,” he said.

That suggests it’ll go for a 50 basis point rate hike at its next meeting in September, according to Carpenter. 

“Our baseline view is 50, but that baseline view is very much dependent on the data we get [on Friday],” Carpenter said. Morgan Stanley is expecting the US to have added around 180,000 jobs in October.

“We’ll get another one before December, if that’s another step down then I think we’ll get 50 basis points,” he added. “That will tell them we are seeing some slowing.”