Investment giant Morgan Stanley now expects the U.S. Federal Reserve to begin cutting interest rates in September 2025, following a shift in approach from Fed Chair Jerome Powell.
Morgan Stanley's Forecast
According to a report by *Reuters*, the Fed appears to be preparing for a more flexible approach given the concerns over slowing inflation and labor market cooling. Morgan Stanley's forecast aligns with increasing market speculation that rate hikes are behind us and easing is on the horizon.
Powell's Tone Change
In his latest public appearances, Powell emphasized the need to balance inflation control with economic stability. He noted signs of progress in reducing inflation while acknowledging potential risks to employment and growth. This shift in tone has been interpreted as an indication that the Fed may be more open to cutting rates sooner than previously expected.
Impact on Markets and Crypto
Rate cuts typically lead to lower borrowing costs, increased liquidity, and stronger investor sentiment. A September rate cut could spark renewed bullishness in stocks and digital assets, especially as investors seek higher-yielding opportunities in riskier assets like Bitcoin and Ethereum.
If Morgan Stanley's predictions come true, the financial landscape could shift significantly in the last quarter of the year.
