Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

The market is still underestimating the number of cuts this year: Morgan Stanley

Published 18/05/2024, 09:40
© Reuters
US500
-

Morgan Stanley (NYSE:MS) economists offered insights into recent economic data and its implications for potential Federal Reserve interest rate cuts.

While market pricing has shifted in favor of two rate cuts this year, and the July Federal Open Market Committee (FOMC) meeting is now seen as a "plausible live meeting," Morgan Stanley said in a note to clients on Friday.

Accordingly, "the market is still underestimating the number of moves this year." However, the brokerage firm added that more evidence would be required for the Fed to begin cutting rates.

The shift in expectations follows a series of economic reports, including April's jobs numbers and retail sales data, which signaled a transition from previous upside surprises to downside surprises.

Notably, the Consumer Price Index (CPI) data for April did not significantly underperform expectations, but rather aligned with them, providing relief to financial markets.

Morgan Stanley had anticipated this change in trend, expecting disinflation to resume, yet projecting the Federal Reserve to maintain rates until September due to data volatility.

Inflation figures appear to be on a downward trajectory based on April's inflation figures. Core Personal Consumption Expenditures (PCE) inflation, which had spiked to an annualized rate of 4.4% in March from 1.6% in December 2023, is projected to decelerate, with April's core PCE tracking at 0.26% month-over-month compared to 0.32% in March.

Morgan Stanley forecasts that the three-month annualized pace will fall back to 2.7% by June.

While a rate cut in July may be premature, three cuts throughout the year could be appropriate, the economists concluded

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.