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1h ago

Morgan Stanley Flips to September Fed Cut as Odds Top 80%

Markets increasingly price a September cut after Powell highlighted downside risks to jobs.

U.S. Federal Reserve Chair Jerome Powell gestures during a press conference following the issuance of the Federal Open Market Committee's statement on interest rate policy in Washington, D.C., U.S., July 30, 2025. REUTERS/Jonathan Ernst/File Photo
A screen displays the trading information for Morgan Stanley on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 19, 2022. REUTERS/Brendan McDermid/File Photo
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Morgan Stanley has changed its forecast regarding a potential Federal Reserve cut in the Federal Funds Effective Rate in September 2025.

Overview

  • Jerome Powell’s Jackson Hole remarks signaled openness to preemptive easing, stressed a data-only approach to decisions, and flagged tariff and immigration policies as potential upside risks to inflation.
  • Market pricing now implies better than 80% odds of a 25-basis-point reduction at the Sept. 16–17 FOMC meeting, according to CME FedWatch and LSEG tools.
  • Morgan Stanley now forecasts a 25-basis-point cut in September and another in December, joining Goldman Sachs, JPMorgan, Barclays, Deutsche Bank and BNP Paribas, while BofA still sees no cuts in 2025.
  • Powell’s hint sparked brief rallies in Bitcoin, Ethereum, gold and U.S. equity futures that largely retraced to pre-speech levels.
  • The Fed’s call hinges on upcoming PCE, CPI and the August jobs report, with potential internal dissents and political pressure, including President Trump’s move to remove Governor Lisa Cook, adding to the backdrop.