Seth Carpenter, Morgan Stanley's Chief Global Economist, noted in his latest report that after Federal Reserve Chairman Warsh reiterated his commitment to bringing inflation back to 2% at Jackson Hole, the market immediately priced in more rate hike expectations, but may have overlooked quantitative tightening as a key variable. Carpenter believes Warsh's logic is that the balance sheet is the root cause of inflation, and withdrawing the "money" created by the balance sheet could keep interest rates lower. Morgan Stanley expects the Federal Reserve to potentially initiate quantitative tightening of $1.5 trillion or more next year.