Morgan Asset Management: The "Teflon-style inflation" in the United States won't stick, and the Federal Reserve does not need to raise interest rates.

David Kelly, Chief Global Strategist at Morgan Asset Management, stated that the Federal Reserve should keep interest rates unchanged, and he expects inflation to gradually decline as more evidence indicates that a sustained wage-price spiral will not form. In an interview on Wednesday following the release of the U.S. Consumer Price Index for July, Kelly said, They absolutely should stay put, and I actually think they will. The report showed that core inflation in the U.S. was moderate in July, and U.S. Treasury bonds maintained their gains after the data was released. Kelly pointed out that three forces are contributing to a significant decrease in inflation: tariff costs are expected to decline year-over-year; optimism about the end of the war in Iran is pushing down oil prices; and wage growth is consistently lagging behind inflation. He added that the latter point means there is a lack of the self-reinforcing momentum needed for price pressures, which also reduces the likelihood of the Fed raising interest rates. He stated, The U.S. is basically experiencing 'Teflon inflation' right now; it just cant stick. He indicated that there is no need to try to speed up this process, Its like an injury; it can only heal slowly. If you try to accelerate it, youll just make things worse. He also remarked, If wages do not respond, a wage-price spiral cannot occur.