Morgan Stanley says disinflation is here, but risks to 2027 rate outlook remain - Investing.com
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Morgan Stanley says disinflation is here, but risks to 2027 rate outlook remain Investing.com
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4 itemsMorgan Stanley delays Fed cut call to 2027 (more info). Middle East risk drives dollar
The desk interprets Morgan Stanley's recent shift in Fed cut expectations as a significant indicator of the evolving monetary landscape, particularly in light of persistent inflation and geopolitical tensions. Per the full note, Morgan Stanley has delayed its forecast for rate cuts to early 2027, reflecting a hawkish drift within the FOMC and a terminal rate projection of 3.0-3.25%. This adjustment comes as the market prices an 83.6% probability of no Fed rate changes through year-end, a notable increase from the previous week's 75.9%. The desk believes that the euro's recent decoupling from traditional rate differentials, driven by Middle Eastern geopolitical risks, underscores the dollar's current safe-haven appeal, with potential upside for the euro contingent on de-escalation in the region.