Name: One Fed Hike—Or More to Come?
Uploaded: 2026-09-17T00:43:45+00:00
Duration: 701 s

Speakers

Michael Gapen — Chief US Economist at Morgan Stanley

Matthew Hornbach — Global Head of Macro Strategy

Summary

Morgan Stanley's Matthew Hornbach and Michael Gapen discuss the Fed's 25 basis point September rate hike and whether more hikes are coming. Gapen argues the committee is likely thinking beyond one move, while Hornbach says energy prices are the key driver of market-implied Fed policy and that the pace of US debt growth matters more than the debt level for Treasury yields. They also cover supply-side inflation, labor-market softness, and PCE methodology revisions.

Fed raised rates by 25 basis points at the September meeting, in line with expectations.
Gapen believes the committee is thinking in terms of more than one hike, though an ex-post one-and-done is possible.
Hornbach says Brent, WTI, and gasoline prices are the primary drivers of market pricing for Fed policy.
Hornbach argues the growth rate of US debt, not its size, is what matters for Treasury yields.
They discuss supply-side inflation drivers, including tariffs, energy, deglobalization, and AI demand.
Labor-market data is viewed as secondary for policy; wage growth is decelerating.
PCE methodology revisions may modestly lower measured inflation and support a slower hiking pace.

Ideas

Michael Gapen Chief US Economist at Morgan Stanley 2:31

Fed likely delivers more than one hike.

The Fed committee is likely thinking in terms of more than one rate move, not a one-and-done hike. Because monetary policy works with a lag and a single 25bp move would not fundamentally change the macro outlook, if the Fed is raising rates there is a strong probability it will do at least one or two more. However, an ex-post one-and-done is possible if inflation continues to disinflate into year-end.

Matthew Hornbach Global Head of Macro Strategy 4:39

PCE revisions may slow Fed hikes.

BEA methodological changes to PCE inflation, especially quality adjustments to software, will likely lower year-over-year inflation by about a tenth or a bit more. Combined with softness in incoming data, this could allow the Fed to hike in September and then not hike again this year, or at least to move at a slower quarterly pace rather than ramping several meetings in a row.

Matthew Hornbach Global Head of Macro Strategy 7:36

Energy prices drive Fed policy pricing.

Changes in energy commodity prices are the primary driver of how the market prices the future path of Fed policy. Empirically, when energy prices rise in a given week or month, markets reprice toward a more hawkish Fed path, and when energy prices fall, they reprice toward a less hawkish path. Brent crude, WTI crude, and gasoline prices are therefore key inputs to monitor for rates-market direction.

Matthew Hornbach Global Head of Macro Strategy 9:27

Debt growth pace, not level, drives yields.

The level of outstanding US debt is not the main driver of Treasury yields; what matters more is how quickly the debt stock grows relative to investor expectations. As an example, US debt rose from about $31 trillion four years ago to around $40 trillion, yet the 10-year Treasury yield was broadly unchanged, showing that a larger debt stock alone does not mechanically push yields higher.

This Morgan Stanley video, published September 17, 2026, features Michael Gapen, Matthew Hornbach discussing Fed Funds Rate, BNO, WTI, UGA, 10-Year Treasury Yield. 4 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Michael Gapen, Matthew Hornbach · Tickers: Fed Funds Rate, BNO, WTI, UGA, 10-Year Treasury Yield

One Fed Hike—Or More to Come?

Summary

Ideas

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