Morgan Stanley Delays Fed Rate Cut Forecast to June Amid Inflation Concerns

Morgan Stanley Pushes Fed Rate Cut Expectations to June

Morgan Stanley economists have revised their Federal Reserve interest rate cut forecast, pushing it back from March to June 2025, according to Odaily Planet Daily News.

Key Takeaways:
No Fed rate cut expected in March as inflation risks remain.
First rate cut now projected for June 2025.
Trump’s accelerated tariff policies may keep inflation higher for longer.

This shift in expectations suggests that the Federal Reserve may adopt a more cautious approach before easing monetary policy.

Why Is the Fed Rate Cut Being Delayed?

1. Trump’s Tariffs May Keep Inflation Elevated

• The faster-than-expected implementation of tariffs on Chinese imports may increase consumer prices.
• Higher tariffs could slow inflation’s decline, forcing the Fed to hold rates steady longer.

2. Fed Waiting for Clearer Economic Signals

• The labor market remains strong, reducing pressure for immediate rate cuts.
• The Fed wants to see sustained progress in lowering inflation before easing policy.

3. Financial Markets Adjusting to New Rate Expectations

• Equities and bond markets had priced in a March rate cut, but forecasts are now shifting.
• Delaying cuts could impact stock market performance and corporate borrowing costs.

What Does This Mean for Investors & Markets?

Bullish Case:
Delayed rate cuts suggest the economy remains strong, reducing recession fears.
A slower rate-cut cycle could stabilize the U.S. dollar and fixed-income markets.
Markets may adjust gradually to a more cautious Fed policy.

Bearish Case:
No March rate cut could disrupt market expectations and increase volatility.
Higher interest rates for longer may weigh on stocks, crypto, and real estate.
Inflation risks from Trump’s tariffs could lead to prolonged Fed hawkishness.

Conclusion

Morgan Stanley’s revised Fed rate cut forecast highlights growing concerns over inflation pressures from U.S. trade policies. While a June rate cut remains likely, the Federal Reserve appears in no rush to ease monetary policy, signaling potential market adjustments ahead.

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