US inflation pressure yet to build up; labour market tightening a worry: Morgan Stanley’s Chetan Ahya

There is some time for inflation pressure to build up in the US, said Chetan Ahya, chief economist & global head-economics at Morgan Stanley, on Thursday.

Speaking in an interview with CNBC-TV18, he said, “We think the Fed and therefore the bond market is going to be a bit calmer. What you have to think about is that underlying inflation when it is driven by tightening of the labour market and pick up in wage growth – that’s the inflation that will be concerning the market and we think there is some time for that inflation to build up.”

“The inflation that we all need to be worried about is the one which is caused by tightening in the labour market. Right now we still have 8.2 million workers in the US who are yet to go back to work. At the same time in the last 12 months, an addition has seen 750,000 people enter. So about 9 million people yet to come back to work. For the Fed to feel that this has been driven by underlying tightness in the labour market and therefore wage growth is driven by inflation. So we have to make a distinction between whether this is sustainable or transitory. We do expect sustainable inflation to pick up too, but as of now we cannot call this as sustainable inflation rise,” said Ahya.