According to data from Jinshi, Morgan Stanley revised its expectation that the Federal Reserve will cut interest rates twice this year at the end of August. They reiterated that they expect the Federal Reserve to cut rates in September, but warned that this is not a certainty. Morgan Stanley pointed out that strong employment numbers or inflation driven by tariffs could delay the Federal Reserve's plans to cut rates this month.
They added that the internal debate within the Federal Reserve is also a hurdle, as there may be disagreements, with some policymakers believing that the Federal Reserve is rushing to cut rates too early. On the other hand, a significant drop in employment numbers, coupled with market bets on preemptive rate cuts, may force the Federal Reserve to act more quickly. That said, Morgan Stanley still believes that the Federal Reserve will continue on a dovish path next year. The institution still assumes that the Federal Reserve will cut rates once each quarter in 2026, with a terminal rate of 2.75% to 3.00%.