Morgan Stanley Flags 2 Inflation Risks to Fed Outlook as US-Iran War and AI Lift Prices
Updated
Updated · Business Insider · Aug 14
Morgan Stanley Flags 2 Inflation Risks to Fed Outlook as US-Iran War and AI Lift Prices
2 articles · Updated · Business Insider · Aug 14
Summary
Michael Gapen said cooling core CPI still supports a patient Fed after July’s rate hold, but that outlook depends on no new supply shock and only limited AI-driven price pressure.
Two risks could break that forecast: the US-Iran conflict has pushed spot and futures oil prices higher again, while AI demand is raising memory, software and electronics costs.
Gapen said the renewed US-Iran escalation reversed the temporary oil-price drop that followed the countries’ MOU, keeping household energy costs elevated and inflation from falling further.
AI is also unlikely to be disinflationary for now, he said, with Apple already citing AI-driven memory shortages for some device price increases and Morgan Stanley expecting electronics prices to stay under pressure for the next few quarters.