Morgan Stanley Strategists Expect Series of Interest Rate Cuts Through Mid-2025 Following Fed's 50bp Reduction
In a recent note, Morgan Stanley strategists predict a series of 25-basis point interest rate cuts extending through mid-2025, in line with the Federal Reserve's data-dependent approach. Chair Jerome Powell emphasized the need for the central bank to remain flexible in its policy decisions.
The forecast includes two more 25bp reductions before the end of the year, bringing the rate down to 4.4%. The team expects the Fed to continue cutting rates into 2025, with an additional four 25bp cuts projected in the first half of next year. This dovish projection reflects the Fed's confidence in inflation moderating toward its 2% target.
Powell highlighted the strength of the economy and labor market but emphasized the necessity to adjust policy. The recent rate cut of 50 basis points signals the Fed's commitment to staying proactive and confident in managing inflation. The "dot plot" indicates an additional 50 basis points of reductions by year-end, aligning with market expectations.
Overall, the dot plot suggests a total decline of around 2 percentage points from the recent decision. This move by the Fed aims to address concerns over inflation and labor market risks while ensuring economic stability.
Analysis:
In simple terms, the Federal Reserve has announced a significant interest rate cut, with more cuts expected in the coming years. This decision is aimed at supporting economic growth, managing inflation, and addressing potential risks in the labor market. As an investor or individual, these rate cuts can impact various aspects of your finances, including borrowing costs, savings rates, and investment returns. It is essential to stay informed about these developments and consider how they may affect your financial decisions in the future.