Welcome to Thoughts on the Market.

I'm Chetanaya, Chief Economist and Global Head of Economics for Morgan Stanley.

Along with my colleagues bringing you a variety of perspectives, I'll be talking about the

risks of an accelerated inflation trend as we emerge from recovery.

It's Tuesday, March 16th at 11 a.m. in New York.

You may have been reading more about inflation recently, with some questions about whether

a return to inflation could be transitory or see a more sustained rise.

I would argue that the driving forces of inflation are actually aligned and a regime shift

could be underway.

Sustained inflationary pressures are ultimately linked to the strength and demand, and by our

estimates, the U.S. economy will now reach pre-COVID output levels this quarter, with

the speed of recovery surprising most market participants and policymakers.

It's a pretty remarkable outcome, considering the shock that the pandemic inflicted on

the U.S. economy.

From third quarter onwards, our forecast now expect U.S. GDP to actually overshoot the

path it was projected to follow before the recession.

To put this in perspective, the last time U.S. GDP rose above pre-resession path was

back in the 1990s, and back then, it took 15 quarters compared to 7 quarters this time

around.

Our U.S. Chief Economist Ellen Zendner is forecasting growth of 7.3% in 2021 and 4.7%

in 2022.

Almost two percentage points above consensus this year and one percentage point next year.

...