Morgan Stanley expects that the Federal Reserve will keep interest rates unchanged in the short term. The bank believes that although Federal Reserve Chairman Kevin Warsh's speech at the Jackson Hole Symposium was on the hawkish side, it is more likely a way to reserve room for future policies rather than a clear indication of a new round of interest rate hikes.

Inflation data still supports a wait-and-see approach.

Morgan Stanley expects that in August, the US core CPI will rise 0.23% month-on-month, and the core PCE will rise 0.20% month-on-month. In the bank's view, such inflation figures are not sufficient to force the Federal Reserve to quickly shift to a tighter policy stance; instead, they support continuing to observe subsequent data.

Annual core inflation may be revised downward

In addition to monthly data, the revision of PCE data is also considered an important variable. Morgan Stanley expects that the revised annual core inflation rate may fall from 3.3% to around 3.1%. If this change occurs, it will further alleviate concerns about a resurgence in inflation.

A hawkish stance does not necessarily indicate a cycle of interest rate hikes

Morgan Stanley believes that the focus of Walsh's recent remarks is on maintaining policy flexibility, rather than sending a signal to the market that there will be consecutive interest rate hikes. In other words, the Federal Reserve still wishes to retain room for adjustment among inflation, employment, and financial conditions.

For the market, this judgment means that, at least at present, interest rate policy is more likely to focus on 'maintaining a high level of observation' rather than quickly entering a new tightening cycle.