Morgan Stanley’s chief U.S. equity strategist, Mike Wilson, expects a “pretty sharp decline in inflation” by the end of next year. Consumer price increases could drop to 4% or 5% by June next year, and return to 2% or 3% by the end of 2023, he told ” Street Signs Asia” from CNBC. This compares to October’s 7.7% increase from a year ago, which was less pronounced than expected. Stocks rallied last week on investor hopes that a peak in price gains was in sight. Investors have been watching comments from the US Federal Reserve closely on when it might pause tightening amid its war on inflation. But Wilson, who is also Morgan Stanley’s chief investment officer, warned that “we are in a new era”. “In other words, there’s less wiggle room in the economy, especially in labor and energy, which means when the economy really picks up, inflation will come back and that will keep the Fed from to cut rates to zero again,” he said. “I don’t think the Fed will ever go back to zero because … inflation has now arrived. So they have to deal with that,” Wilson added. This follows other calls that the era of cheap money is over, heralding tough times for sectors such as technology. Wilson added that the markets are in a “boom-bust environment” – with shorter, hotter business cycles. “We think we are entering a period where the economic expansions are going to last between three and four years as opposed to the eight to ten year period, because monetary policy cannot come to the rescue as quickly as it was. in the past – because inflation is going to be in the background now,” he said. Inflation remains “stickier” for these 2 areas Wilson said there are still two areas where inflation could be ‘stickier’: energy and labor.” These are two areas where we have a bit of a shortage and this will also keep inflation above probably 2% on a structural,” he said. Energy, in particular, is in a bull market structurally, “not even cyclically,” Wilson said. “I mean, it’s a new bull market for energy .” Energy is currently the only S&P 500 sector in the green year-to-date, according to FactSet.