Morgan Stanley delays Federal Reserve rate cut expectations until next year

Golden Financial reports that on April 30th, Morgan Stanley stated that due to persistent U.S. inflation and resilient economic performance, the bank has abandoned its previous forecast of a rate cut by the Federal Reserve in 2026, now expecting to start cutting rates only next year. Morgan Stanley noted in the report that inflation remains above the Fed’s 2% target, and recent economic data indicate sustained strong growth and a robust labor market, reducing the urgency for further policy easing. The bank stated, “The rate cut threshold has been raised, and the Federal Reserve seems prepared to continue waiting,” as policymakers may adopt a cautious stance while assessing the lagging effects of previous tightening measures and the continued trend of recent inflation decline. Morgan Stanley expects that as inflation pressures more noticeably ease and economic growth slows toward trend levels, the Federal Reserve will implement rate cuts in January and March of next year. (Jin10)