Bloomberg Surveillance · Friday, September 25, 2026
Michael Gapin, Chief U.S. Economist at Morgan Stanley, expressed concern that elevated oil and diesel prices could lead to persistent second-round inflation effects extending into 2027. He noted that while the Fed cannot directly control energy prices, it is responding to these higher costs, indicating a shift from its usual playbook of looking through such shocks.
“So it's increasingly likely we're going to get second-round effects that mean inflation, affordability, the cost of living remains a concern in 2027. Now, the Fed cannot.”
“The standard playbook is look through it, ignore it, but they can't anymore. Even Powell made that clear. So the Fed's now in motion. They are responding to it. The question is, how far will they go?”