Morgan Stanley (MS)

Higher inflation in 2024 likely: NABE

Inflation is likely to stick around at higher-than-desired levels for the rest of the year, according to a new survey by America’s top economists. "With the higher inflation expectations, panelists now anticipate the Federal Reserve’s Open Market Committee will cut rates by half a percentage point – down from three-quarters of a point and to occur later in the year than previously expected" wrote National Association of Business Economics President Ellen Zentner, who is also chief U.S. economist at Morgan Stanley. NABE’s May survey, which includes 43 professional forecasters, now pegs inflation to stall at 2.6%. While down from April’s consumer price index reading of 3.4%, it remains above the Fed’s preferred 2% target, a level expected to green-light interest rate cuts. Still, prices have come down sharply from the 9.1% peak. CONSUMER ETFs SHOW THE REAL INFLATION PICTURE About 48% of market participants see the Fed cutting rates for the first time in September to 5%-5.25%, according to the CME’s FedWatch Tool, which tracks the probability of rate moves. The Federal Funds rate is currently at 5.25%-5.5%. Still, Fed Chair Jerome Powell was a bit downtrodden about the inflation battle in his remarks last week. "We did not expect this to be a smooth road, but these were higher than I think anybody expected," he said. "What that has told us is that we will need to be patient and let restrictive policy do its work," he said during a panel discussion at the Foreign Bankers' Association in Amsterdam. His remarks followed a month-over-month 0.4% rise in the producer price index for April, which tracks prices at the wholesale level. Annually, prices rose 2.2%. Both were higher than previous reports. INFLATION BREAKDOWN: A LOOK PRICES RISING THE MOST Americans are paying more for everyday staples, especially food, compared to a year ago, including a 4.8% jump for canned vegetables, hot dogs are up 7.1%, butter 3.5% and sugar 4.3%, as reported in April’s CPI. CAR INSURANCE RATES KEEP RISING, FUELING INFLATION As a result, more consumers are loading up credit card debt to make ends meet. Consumers owe $1.02 trillion in credit card debt, according to the Federal Reserve Bank of New York. The average debt per borrower is north of $6,200 through the first quarter, up 8.5% from a year ago, TransUnion reported. FOX Business' Megan Henney contributed to this report.