摩根士丹利：油价推升通胀预期，美联储或被迫加息3-4次

Bloomberg Audio Studios podcasts, radio, news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. This is our interview of the day for global Wall Street. I don't know what else to say about it. Michael Gapen brings prodigious academics and abilities across market economics now with chief US economist at Morgan Stanley with a couple brilliant notes.

And what I would really It's Indiana University Paul

love it.

It's like grounded.

Yep. They're solid,

you know. You know, it's like serious serious economics. Good morning, Mr. Bullard as well. Ex St. Lewis Fed Michael buried in one of your notes is the heart of the matter which no one's talking about and this goes back to Friedrich Bastiad 1850 which is second and third round effects and that everybody's looking at the immediate oil bonds and that but what we need to consider are the second round and third round effects of what we're living right now.

Can you see out into 2027? What are the second and third round effects of all this inflation, these yields in the central bank policy? Well, in one direction, well, first of all, good morning, Paul. Good morning, Tom. Uh, thank you for that introduction. Um, the second round effects on inflation are related to, as you've been discussing, gas, diesel. Normally, oil shocks are relatively short-lived. Oil goes up, oil comes down, and we don't expect second round effects.

But we're we're 6 months in, and it's anybody's guess when when this might end. Airfares, for example, are up about 24% yearon year. So it it's increasingly likely we're going to get second run effects that mean inflation, affordability, the cost of living remains a concern in 2027. Now, the Fed cannot directly control oil prices and diesel prices, but it does have the ability to lean against those second round effects.

So, the question is exactly what is the Fed responding to here? But it's clear higher energy prices, they're not looking through this. The standard playbook is look through it, ignore it, but they can't anymore. And Worsh made that clear. Even Powell made that clear. So, it is it it is the Fed's now in motion. They are responding to it. The question is, you know, how far will will they go? Other second round effects that that I'll mention that we're keeping an eye on, I mean, obviously the AI spending story is important, but somewhere in here in 20 2027, 2028, the growth rate of that spending will be slowing.

So, what's more important? The the level of spending or the growth rate.

So, some somewhere in here, you know, there could be an inflection. We think it'll be coming in 2027 where some of the edge comes off of of of the narrative.

I mean, Paul, it's like your kids spending in college. Is it the level or the growth rate?

Exactly. So, Michael, given that inflation backdrop, how do you view kind of the yield environment out there? A lot of folks are saying it's not so much where the absolute yields are today, but maybe it's just the velocity with which uh yields have pushed higher here. How do you think about that? Well, it's I I think it's clearly a perfect storm in the rates markets. Uh fundamentals, technicals, a whole bunch of reasons have have pushed rates higher.

So, the magnitude of the move has been quite strong. We're up about, you know, roughly 150 basis points and almost the entirety of that move has come in real yields. So, the market is clearly saying whatever's happening out there, monetary policy is going to respond to it. markets are pricing in three to four additional hikes. And what it will do is it'll kind of we think it will perpetuate this K-shaped narrative. It's very unlikely higher yields uh will slow down the rate of hyperscaler spending and and borrowing.

The AI story we think is immune to a lot of this. So the Fed will be forced to essentially slow down the parts of the economy that are already slow in order to help bring inflation down. But the Fed has to respond with the economy it has, maybe not the one it wants.

Does that sound like a guilded age?

Yeah,

it does a little bit. Well, that kind of takes us to the next question there, Michael. I mean, despite some of the inflation headwinds, despite, you know, maybe some of the uncertainties out there, uh, whether it's geopolitics or whatever, the consumer here for the US consumer pretty darn solid here. What do you make of the US consumer?

Pretty good all around. You're right. the the narrative is as I'm sure you've talked about over time is oh in in the next quarter the lower and middle inome household will be suffering and consumption's going to slow and I think the resiliency of that consumer has been quite amazing certainly the tax cuts have helped drawing down on the saving rate has has helped we all wonder maybe how long that resiliency can go on but but top to bottom I mean the upper income household is benefiting from tremendous wealth accumulation that's being boosted by the AI story, but the consumer has has held in.

So the resiliency argument around US growth has been has been strong. We all wonder how long that can continue, but the data says it's still in play.

We are advantaged. This morning, Michael Gapen with us with Morgan Stanley with a global perspective. Michael, one of your joys is in London. You have Martin Ross, uh, your global oil strategist who does absolutely brilliant work synthesizing this lift in diesel. And as Torstston Slack and Apollo notes, will that fold into core inflation unlike a gallon of gas which is outside core inflation? Is diesel part of our core inflation future?

It it is. And I I think maybe we we underestimate I think the importance of of diesel in the in the middle part of of the country. You know, you noted that I came out of Indiana. The Midwest in the plain states, the agriculture side of of the economy uses diesel heavily. So, the diesel exposure in that part of the country is high. It's built around agriculture, farming, moving goods and and products. And this is uh you know, inflation has come down as we thought, but it's come down more slowly and and we have built in second round effects um on a lot of transportation costs because of the diesel story.

So, we do think it's something maybe we won't see it like upfront, but it'll be there in a way that I think continues to stretch the pocketbooks of the economy and the average American.

Michael, certainly on global Wall Street, one of the key themes over the last three, four, five years has been AI and just the immense spending associated with AI. How does that impact your view of kind of just underlying economic activity here in the US? I mean to the extent that AI spending were to slow maybe slow materially nobody's calling for that but would that be a problem for the US economy? It it would be um I mean history would say so if you look at the prior investment booms and going all the way back the to the industrial revolution through the digital and internet era all of these narratives have a boom bust story to it that there's there's a period where you get tremendous acceleration and optimism capital spending and borrowing and it creates kind of a very resilient economy.

At some point that spending has to has to slow if the question is how quickly does it slow? Do winners and losers get revealed? So yes, a slowdown in that spending would would be a problem for the economy. The question of course is why is it slowing and and how fast uh is it slowing? And I think that a secondary story here for us is um it's it's this is different spending about 60 to 70% of the hyperscaler spending goes to computers and peripherals the things that go into the data centers and almost all of that's imported.

So are we are we creating say positive output gaps uh and and an overheating econ