US inflation, Fed outlook, and oil risk (with Abeer Abu Omar)

Morgan Stanley's Rajeev Sibal says the market was comforted by a benign core CPI print despite a high headline, countering strong payrolls. He expects the Fed to hold rates, with a potential easing bias removal. Key risks to equities are a growth scare from oil above $130 or a pullback in AI capex. He focuses on oil's transmission to growth, not inflation, and warns of persistence if oil stays elevated.

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implicit

explicit

Metals

USD

Morgan Stanley 8.4
Investment Bank $1600.00B
Rajeev Sibal 9.0

US inflation, Fed outlook, and oil risk (with Abeer Abu Omar)

ndx

Sibal says equities can perform because growth is resilient. A growth scare from oil or AI pullback is not the base case. This supports a cautious upward view for NDX in the medium term, contingent on no escalation.

rut

Sibal's positive view on growth resilience and the base case of no growth scare supports a cautious upward view for RUT, though small caps are more sensitive to growth shocks.

wti

If oil were to move past $130, $140, $150 because of an escalation in conflict, that would be a growth scare. If oil moves materially higher, it's more of a growth risk than an inflation risk.

5 calls

-12

slightly worse than random

5/12/2026 6:55:36 PM	short term up	5 days later	+7.56%	+7.56%
5/7/2026 7:48:56 PM	medium term cautious up	20 days later	-6.83%	-3.42%
3/28/2026 12:19:11 AM	medium term up	21 days later	-12.90%	-12.90%
3/12/2026 10:06:31 AM	short term up	5 days later	-2.42%	-2.42%
1/5/2026 1:42:32 PM	short term cautious down	6 days later	+4.15%	-2.07%

Show all 5 wti results

yields

The Fed will be on hold for the time being. The statement will likely become more neutral, removing any easing bias.

23 calls

-2

no reliable edge (random outcomes)

5/20/2026 9:05:17 AM	short term up	5 days later	-2.03%	-2.03%
5/13/2026 1:42:53 AM	short term cautious up	5 days later	+4.62%	+2.31%
5/7/2026 7:48:56 PM	medium term cautious down	20 days later	+2.09%	-1.04%
3/28/2026 12:19:11 AM	medium term up	21 days later	-2.12%	-2.12%
12/23/2025 1:36:10 AM	short term cautious down	5 days later	-0.48%	+0.24%
12/18/2025 1:46:01 AM	medium term cautious down	20 days later	+0.77%	-0.39%
12/8/2025 1:14:06 PM	medium term cautious down	20 days later	-1.67%	+0.84%
12/2/2025 9:28:55 PM	medium term cautious down	20 days later	+2.76%	-1.38%
11/28/2025 6:46:36 PM	medium term down	21 days later	+1.78%	-1.78%
11/25/2025 12:34:15 AM	medium term down	20 days later	+3.78%	-3.78%
11/22/2025 1:57:04 AM	medium term cautious down	21 days later	+3.57%	-1.78%
11/14/2025 8:08:25 PM	short term cautious down	7 days later	-2.30%	+1.15%
11/12/2025 1:48:25 PM	short term cautious down	5 days later	+0.27%	-0.13%
11/4/2025 2:20:08 PM	medium term cautious down	20 days later	-3.73%	+1.86%
11/3/2025 5:11:21 PM	medium term cautious down	20 days later	-1.25%	+0.62%
10/21/2025 3:40:54 PM	short term cautious down	5 days later	+1.11%	-0.56%
9/24/2025 2:05:49 AM	short term cautious down	5 days later	-0.58%	+0.29%
9/17/2025 8:50:18 PM	medium term cautious down	20 days later	+0.61%	-0.30%
9/8/2025 7:17:58 PM	short term cautious down	6 days later	-0.98%	+0.49%
9/4/2025 5:07:54 PM	medium term cautious down	20 days later	+2.10%	-1.05%
8/12/2025 6:27:35 PM	short term cautious down	5 days later	+2.43%	-1.22%
8/5/2025 10:59:28 PM	medium term down	20 days later	+0.90%	-0.90%
8/5/2025 2:12:54 PM	short term cautious down	5 days later	+1.26%	-0.63%

Show all 23 yields results

Asks about the market's muted reaction to the CPI print (headline at 3-year high).

Abeer Abu Omar
Rajeev Sibal

The market had already reacted to strong nonfarm payrolls. The CPI headline was high, but core was benign and softer sequentially, providing comfort that there is a counterweight to the strong payrolls print ahead of the Fed meeting.

The pass-through to core was not as much as some people feared.
Asks what matters more in the CPI print for asset allocation: core or headline.

Abeer Abu Omar
Rajeev Sibal

As an economist, he focuses on core. Headline affects disposable income and savings, but they view that as temporary if it doesn't pass into core. They don't expect a material impact on core in one year's time.

Headline eats into disposable income and depletes savings in the US, but we as economists view that as temporary if it does not pass into core.
Asks if the CPI print solidifies a rate hike or keeps the Fed on hold (higher for longer).

Abeer Abu Omar
Rajeev Sibal

The Fed will be on hold for the time being. The benign core is positive, but tariffs are still there and have started a trajectory lower. These are mixed signals. The market is waiting for the dissents to go away and for a clear indication that inflation is moving lower, which probably starts deeper into Q3.

In the last meeting we had three dissents from the Fed, which is unique and unusual. The market is sitting there saying even if inflation were to move lower, we can't do that until the dissents go away.
Asks if the market is wrong to assume the inflation resurgence is temporary and energy-driven.

Abeer Abu Omar
Rajeev Sibal

The market is not wrong. The inflation lower path probably starts deeper into Q3. It's a matter of patience and waiting because of the top-heavy effects of oil pass-through.

You won't have a clear signal until then because we are dealing with the top-heavy effects of the oil pass-through right now.
Asks what to look forward to at the next Fed meeting, especially regarding dissents and Kevin Warsh's first meeting.

Abeer Abu Omar
Rajeev Sibal

He doesn't expect three dissents again. The statement will likely become more neutral, removing any easing bias. The key focus will be Kevin Warsh's first meeting and the market learning his new communication style.

Every time we have a Fed chair transition, the market has to learn the style of the new Fed chair.
Asks what challenges the resilient equity market perspective: geopolitics or pauses in the AI trade.

Abeer Abu Omar
Rajeev Sibal

Equities can perform because growth has been resilient with no clear indication of faltering in the next 1-2 quarters. A growth scare would come from oil moving past $130-150 due to escalation, or a pullback in AI capex. Neither is the base case.

If oil were to move past $130, $140, $150 because of an escalation in conflict, that would be a growth scare. Alternatively, if there were to be some sort of pullback in AI capex, that could be a growth scare.
Asks how to position given the geopolitical situation in the region.

Abeer Abu Omar
Rajeev Sibal

They focus on how geopolitics transmits to the oil price. If oil moves materially higher, it's more of a growth risk than an inflation risk. A permanent oil premium could disrupt supply chains and move into core inflation, making persistence a problem. So far it's been benign, but if it lasts many more months or oil moves much higher, they would have to reassess.

If you are in an oil premium where oil sits at $110-120 for six more months, that's a world in which you could have disruption into supply chains, not quite COVID-like, but you could have a little bit broader effect because transportation is disrupted moving into core inflation.

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