Inflation will drop very quickly in the US, according to Morgan Stanley
Inflation in the US is expected to drop soon, and much faster than expected, or at least that's the idea of Michael Wilson of Morgan Stanley. Inflation should go down essentially for two reasons:
- The injection of money from QE and policies The index stood at 2.6% Y after the government disbursed more than $ 3 trillion in fiscal stimulus during the 1st quarter of the 21st year. As a result, the money supply (M2) had grown by 27% per annum. Never, in the history of this data (over 70 years), had M2 grown even by only half this rate. Given that inflation is always and everywhere a monetary phenomenon, it was very clear that inflation at 2.6% per annum would likely explode higher. Today the cunsumo price index stands at 8.2% per annum, a 40-year high and marginally below the peak of 9.1% per annum reached in June. However, M2 is only growing 2.5% per annum and is falling rapidly. Given M2's leading inflation properties, the seeds have been sown for a sharp decline next year. So we should expect, according to Morgan Stanley, a very rapid decline in inflation,
In conclusion, inflation has reached its peak and is likely to fall faster than expected based on M2 growth. This could give equities some relief in the near term as rates will fall in anticipation of the change. However, it is necessary to evaluate how the reduction in inflation will affect the operating profit of companies: a deflationary shock, following an inflationary one, can have important repercussions on consumption, turnover and company margins. A situation that in the medium term can lead to a strong reduction in the operating margin and therefore affect the stock market prices. So it will be necessary to see how the decline in the rate of price increase will act in practice
Thanks to our Telegram channel you can stay updated on the publication of new articles of Economic Scenarios.
The article Inflation will fall very quickly in the US, according to Morgan Stanley comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/linflazione-scendera-molto-rapidamente-negli-usa-secondo-morgan-stanley/ on Mon, 31 Oct 2022 07:00:59 +0000.