The question of when the Federal Reserve (FED) will cut interest rates remains pertinent. Morgan Stanley has updated its forecasts, linking them to the shift in rhetoric from FED Chairman Jerome Powell.
Background on Interest Rates
The Federal Reserve has kept interest rates unchanged since January, and expectations for a potential change remain high. Several investment banks have started revising their forecasts accordingly.
Morgan Stanley's Predictions
According to the updated data from Morgan Stanley, the FED is expected to make two interest rate cuts in September and December 2025. Previously, the bank projected rates would remain steady until March 2026, but Powell's shifted tone at the Jackson Hole summit has bolstered these expectations.
Market and Other Banks' Reactions
Following Powell's statements, banks like Barclays, BNP Paribas, and Deutsche Bank have also adjusted their forecasts, anticipating a 25 basis point cut in September. The probability of a rate cut is currently estimated at 84 percent in the markets.
Thus, expectations for FED interest rate cuts remain high and could significantly affect financial markets in the coming years. The forecasts provided by Morgan Stanley and other investment institutions may serve as indicators of future changes in economic policy.
