Morgan Stanley says a 'trifecta' of 'peak pressures' are driving inflation. Bessent sees 'substantial disinflation' ahead — could both be right?

At the same time, though, Treasury Secretary Scott Bessent said he expects price pressures to ease soon and expects we'll then see a period of "substantial disinflation" (2).

It is, of course, not uncommon for Wall Street analysts to have a viewpoint that's entirely different from the current administration. Analysts are responsible for helping people make more money. Administrations always want to find a positive spin on the economy to help boost approval ratings and enhance re-election chances.

But this is a rare case of where both sides could be telling the truth, even if those viewpoints seem to conflict.

It's all about the peak

The central issue Bessent and Morgan Stanley converge on is when we'll hit peak inflation. Morgan Stanley says it will occur in May or June. That's because of three key factors: tariffs, which haven't fully been factored into core prices yet; continuing energy price spikes, due to the war in Iran; and inflation from the housing market, which we're still getting a handle on thanks to the federal shutdown last fall.

"You still have kind of a — what I call a trifecta here," Michael Gapen, the bank's chief US economist told reporters, adding that he believes the US is currently experiencing "peak pressures" when it comes to inflation.

Bessent, speaking with CNBC, agreed that the market is likely to see one or two more “hot inflation numbers," but then, he said, "I think we’re going to see substantial disinflation."

The U.S. will continue to pump oil to ease supply issues from the Iran war, Bessent said, which he sees as the primary problem. Before the military action, he notes, core inflation was coming down and he expects it will again. (The Consumer Price Index, it's worth pointing out, has been increasing steadily since January.)

The Fed question

Kevin Warsh has taken over as Chairman of the Federal Reserve, replacing Jerome Powell, and many market observers believe he will be much more open to Donald Trump's forceful calls to reduce interest rates.

The hurdle, however, is he can't do that on his own — and the Fed's Board of Governors indicated at the last meeting that they're disinclined to do so.