By Seth Carpenter, Morgan Stanley global chief economist
The Fed’s Journey of a Thousand Miles…
…begins with one step, as the saying goes. The first step in policy normalization for the Fed started over a year ago when the FOMC ended quantitative easing (QE) and started raising rates. The journey to a peak – which looks like the July meeting – has been a bit of a Two-Step, to reprise the dance theme from my piece “Music to My Ears” a couple of months ago. Last week’s CPI print indeed was music to the ears of the Fed and markets. So…what happens next? In particular, when will the Fed start cutting rates and what happens to quantitative tightening (QT)?
