Morgan Stanley scraps call for Fed rate cuts this year

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Morgan Stanley has reversed its previous forecast for two 25-bps Fed rate cuts in September and December 2026, now expecting no rate changes this year. The firm attributes this pivot to persistently high inflation and robust economic data, alongside ongoing Middle East tensions. This revised outlook aligns with current market pricing, which suggests no rate changes through the year and only a marginal possibility of rate hikes by 2027.

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