Morgan Stanley forecasts that the Fed will cut interest rates twice in 2025, a significant turning point following Chairman Powell's speech at the Jackson Hole conference.
This move signifies a clear change in U.S. monetary policy, reflecting concerns about the labor market and political pressure from President Trump.
MAIN CONTENT
Morgan Stanley forecasts the Fed will cut interest rates by 25 basis points in September and December 2025.
The shift in perspective is due to Chairman Powell's change in focus from inflation to risks in the labor market.
Political pressure from President Trump may affect the independence of the Fed.
How has Chairman Powell changed his stance at Jackson Hole?
Morgan Stanley states that the forecast change stems from Chairman Jerome Powell's speech at the annual Jackson Hole conference. He no longer emphasizes inflation risks but shifts attention to increasing concerns about the U.S. labor market.
According to this bank, Powell's tone marks a difference from before when he focused on persistent inflation and low unemployment, suggesting that the Fed may act preventively to mitigate negative risks to the labor market.
Under the new forecast, Morgan Stanley expects the Fed to cut interest rates in steps of 25 basis points in 2026, bringing rates to about 2.75%-3.0%.
Which banks agree with the forecast for interest rate cuts?
In addition to Morgan Stanley, many large banks such as Barclays, BNP Paribas, and Deutsche Bank also expect the Fed to cut interest rates by 25 basis points in September. Meanwhile, ING has a more aggressive scenario, with three cuts of 25 basis points each in September, October, and December 2025, followed by a further reduction of 50 basis points in 2026.
Data from LSEG and the CME FedWatch tool currently indicates that the probability of the Fed cutting interest rates in September is 81.9% and 84.3%, respectively.
In contrast, Bank of America maintains the view that the Fed will keep interest rates unchanged this year.
What is the impact of political pressure from President Trump on the Fed?
Politics also plays an important role in the current context as President Trump announced he would fire Fed Governor Lisa Cook over allegations related to mortgage fraud. This raises concerns about vacancies at the Fed and the potential shift in the balance of power within the Federal Open Market Committee (FOMC).
JPMorgan analysts warn that these developments could affect the independence of the Fed's monetary policy decisions, adding political pressure.
Morgan Stanley thus maintains a cautious stance, only assessing the possibility of the Fed cutting interest rates at 50% in September, while still considering risks related to inflation and political pressure.
What does the September FOMC meeting mean?
Morgan Stanley emphasizes that larger interest rate cuts will only occur if labor decreases sharply. This department also warns that there may be dissent within the FOMC at the meeting on September 16-17.
This meeting is of particular interest to the market and cryptocurrency investors, as the Fed's loosening policy could trigger liquidity flows, supporting the price of Bitcoin and other digital assets.
September is seen as a crucial time when the Fed may change policy.
"Chairman Powell's tone at Jackson Hole indicates that the Fed is beginning to pay more attention to risks in the labor market and may act soon to maintain economic stability."
– Morgan Stanley, monetary market analysis, 2025
Frequently Asked Questions
Which bank forecasts that the Fed will cut interest rates in 2025?
Morgan Stanley, Barclays, BNP Paribas, Deutsche Bank, and ING all expect the Fed to cut interest rates in 2025.
What is the main factor causing Morgan Stanley to change its forecast?
Chairman Powell's speech at Jackson Hole shifted the focus from inflation to risks in the labor market.
How does political pressure affect the Fed?
President Trump's firing of a Fed commissioner could reduce the Fed's independence and influence policy decisions.
What is special about the September FOMC meeting?
This meeting is expected to determine the direction of monetary policy and may witness dissent within the committee.
What is the impact of the Fed cutting interest rates on the cryptocurrency market?
Loosening policy stimulating liquidity could drive the prices of Bitcoin and other digital assets up.
Source: https://tintucbitcoin.com/morgan-stanley-nang-du-bao-lai-suat-fed/
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