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As inflation in the United States heats up sharply, Morgan Stanley said the Fed will raise interest rates sooner and faster, and expects that US economic growth will further slow down to next year, and the fundamental outlook for US stocks is deteriorating.
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The Fed previously set an average inflation target of 2%, allowing the inflation rate to be “moderately” higher than 2% for a period of time. However, the U.S. 5-year breakeven inflation rate announced on October 22 climbed more than 9 basis points to 3.007%, breaking through 3% for the first time in a record, far exceeding the Fed’s long-term inflation target of 2%.
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As inflation in the United States heats up sharply, Morgan Stanley said that the Fed will raise interest rates sooner and faster, and it is expected that the Fed may officially announce its debt reduction plan at this week’s meeting.
Earlier, Wall Street articles also mentioned that the US GDP in the third quarter grew by only 2.0% from the previous quarter, which was a significant slowdown from the second quarter growth rate and was lower than expected.
Morgan Stanley believes that the overall economic slowdown in the United States will be more serious than expected and will last longer because demand will fall early next year and personal disposable income will drop significantly year-on-year.
Although some analysis pointed out that the substantial increase in personal savings will make consumption far higher than the trend, but in the view of Morgan Stanley, personal savings seems to have been consumed to the level before the new crown epidemic.
In addition, Morgan Stanley said that the more important driver of the economic slowdown is the transition from the extreme peak after the recession to the mid-cycle, and “this adjustment has not yet been completed.”
Morgan Stanley: The fundamental outlook for U.S. stocks is deteriorating
Reprint indicated source：Spark Global Limited information