Morgan Stanley changed its interest rate forecast: Earlier, less

Morgan Stanley expects the Fed to make its first interest rate rebate in September after December. The bank cited U.S. Central Bank Chairman Jerome Powell's speech at Jackson Hole as the reason for this expectation. As a reminder, Powell mentioned the weakness in the labor market here and conveyed a message of interest rate rebate.

Earlier but less…

In the bank's previous expectation report, it was stated that there would be no interest rate cut until March 2026, but after this date, a wave of significant reductions was expected.

The latest report stated that it is expected that the rebates will be made earlier but in fewer numbers.

According to the report, the Fed will make its first rebate of 25 basis points in September after a long time. The next rebate is expected to come in December. So, the bank expects 2 more rebates in 2025.

"It will remain around %2.75–3.0"

However, Morgan Stanley predicts that interest rate cuts will be more limited than previous forecasts. This means that rates will not go to much lower levels and will remain around 2.75–3.0% by the end of 2026.

Bank analysts also stated that a rate rebate in September is "not guaranteed" despite all expectations, and that a sharp increase in inflation caused by tariffs or positive non-farm payroll figures could change this scenario.

Published: August 26, 2025 14:54Last Updated: August 26, 2025 15:00