Morgan Stanley has backtracked on its previous forecast for interest rate cuts by the US Federal Reserve this year, now expecting the US central bank to keep interest rates unchanged until the end of 2026.
This shift came after the Fed’s recent decision, which saw unusual opposition from some policymakers at the US Federal Reserve. Notably, Hamak, Kashkari, and Logan all expressed their clear refusal to continue adopting an easing approach at this stage.
In addition, this is Jerome Powell's last meeting as chairman of the US Federal Reserve, but markets do not seem convinced that Donald Trump will be able to push for an interest rate cut in the coming months, especially given the continued uncertainty about when the conflict between the United States and Iran will end.
Morgan Stanley had previously predicted two 25-basis-point cuts in September and December of this year, but has now revised those forecasts, suggesting that no change in interest rates is expected until the end of the year by the US Federal Reserve due to continued high inflation rates, along with recent economic data indicating the economy's resilience.
