Morgan Stanley Scraps Fed June Cut, Sees Next Reduction in 2026

Morgan Stanley analysts push back their call for the next Federal Reserve interest-rate cut to next year, citing inflation risks arising from tariffs.

• “We now remove our expected rate cut in June given what is likely to be a healthy inflation impulse in the coming months,” write economists including Michael Gapen in a client note
  • They now see the next rate-cut cycle beginning in March 2026, with a terminal rate of 2.50-2.75%
  • “The Fed will have trouble looking through the near-term impulse to inflation and ease quickly”
  • “This, of course, is contingent on the economy remaining in a modest growth ...