U.S. May Avoid Recession But EW Will Be Hit: Morgan Stanley

Britain and the eurozone economies are likely to tip into recession next year, Morgan Stanley said, but the United States might make a narrow escape thanks to a resilient job market, Kevin Buckland reported for Reuters.

Photo Insert: Wall Street closed last week with a rally, amid hopes inflation pressures had eased. That would make the Federal Reserve less likely to keep raising interest rates.

Morgan Stanley also warned that political strife in the US, with the Democrats holding the Senate and the Republicans poised to a narrow win at the Lower House, will be conducive to bitter wrangling on economic policy.

“Policy paralysis at a time of economic crisis is not a good look for what may lay ahead over the next two years. The current stock rally may have only days to run,” said Clifford Bennett, chief economist at ACY Securities, told the Associated Press (AP).

Wall Street closed last week with a rally, amid hopes inflation pressures had eased. That would make the Federal Reserve less likely to keep raising interest rates. But some analysts said the Wall Street rally was overdone.

A report last week showed inflation in the United States slowed by more than expected last month. The Fed has already lifted its key overnight interest rate to a range of 3.75% to 4%, up from basically zero in March.

The likely scenario is still for further hikes into next year, Yuri Kageyama reported for AP.

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