Morgan Stanley Fixed-US Economics Global Macro Strategy US Inflation After th...-108013414

MMay3,202404:34PMGMTMorganStanley&Co.LLCIdeaUSEconomics&GlobalMacroStrategyNorthDiegoAnzoategui+1212761-8573America+1212761-1445Economist+1212296-4882USInflation:AftertheUpswingDiego.Anzoategui@morganstanley.com+1212761-4630+1212761-0857Reflationin1Q24wassubstantial,butweakerprintsarecoming.GuneetDhingra,CFA+1212761-2779Rents,goods,andfinancialserviceswilldecelerateatthemargin.Underappreciatedisthat1QstrengthwasinpartdrivenbyStrategistresidualseasonality,pointingtopaybackin2H24.TheGuneet.Dhingra@morganstanley.comdownswingiscoming.EllenZentnerKeyTakeawaysChiefUSEconomistReflationin1Q24wasmostlyexplainedbyanaccelerationingoodsandfinancialEllen.Zentner@morganstanley.comservicesprices.Weexpectbothcomponentstodeceleratefromhere.SamDCoffinLeadingindicatorspointtoevenweakerrentsinflationinthesecondhalfoftheyearthanwepreviouslyanticipated.EconomistSam.Coffin@morganstanley.comOuranalysissuggeststhatresidualseasonalitycontributedtotheunexpectedstrengthin1Q24inflation,suggestingpaybackin2H24.SarahAWolfeDeceleratinginflationwilldriveyieldslower,especiallywithinvestorsnotEconomistappreciatingtheroleofresidualseasonality.Westaylong3m30yreceivers.Sarah.Wolfe@morganstanley.comLenoyDujonUS/CanadaEconomistLenoy.Dujon@morganstanley.comExhibit1:Onlyahandfulcomponentsdrovetheaccelerationin1Q24inflation10.00CorePCEandComponents(3M...