(Reuters) – Morgan Stanley said on Friday it expects the U.S. Federal Reserve to cut interest rates in all three of its meetings this year, after data showed U.S. consumer prices increased by the most in seven months in August. The brokerage previously forecast one 25 basis-point cut each in September and December. The Fed […]
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Morgan Stanley expects three U.S. interest rate cuts this year
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(Reuters) – Morgan Stanley said on Friday it expects the U.S. Federal Reserve to cut interest rates in all three of its meetings this year, after data showed U.S. consumer prices increased by the most in seven months in August.
The brokerage previously forecast one 25 basis-point cut each in September and December.
The Fed is widely expected to kick off a new easing cycle in next week’s policy meeting – its first since the 25-bps rate cut in December 2024 – after recent data pointed to a slowdown in the job market.Last month, Fed Chair Jerome Powell signaled a rate cut was possible at the September 16-17 policy meeting, citing rising labor market risks, while cautioning that inflation remained a threat.Morgan Stanley said market conditions give the Fed room to move more quickly toward a neutral policy stance.
According to the Wall Street brokerage, the Fed is likely to deliver four back-to-back 25-bp rate cuts starting next week and continuing through January, with two further cuts projected for April and July 2026.
Traders have priced in a 92.7% chance of a 25-bp rate cut next week, according to the CME FedWatch Tool, with a slim 7.3% chance of a deeper 50-bps cut.
After a soft August labor print, Standard Chartered emerged as the only brokerage predicting a 50-bps rate cut by the Fed this month, diverging from the broader consensus.
(Reporting by Joel Jose in Bengaluru; Editing by Maju Samuel)