Morgan Stanley defies market, sees two US rate cuts in 2026

2026-03-17 - 19:42

Morgan Stanley has reaffirmed its outlook that the US Federal Reserve will begin cutting interest rates in June, followed by a second reduction in September, despite recent market shifts driven by rising oil prices. The bank’s forecast runs counter to current market sentiment, where investors have scaled back expectations for monetary easing after the surge in oil prices linked to the war with Iran heightened concerns over renewed inflationary pressures. These concerns could constrain the Federal Reserve’s ability to proceed with aggressive rate cuts, reports Al-Rai daily. Market pricing now suggests a more cautious outlook, with interest rate futures indicating only a single quarter-point cut in December — down from earlier expectations of at least 50 basis points in reductions. Meanwhile, the probability of a September rate cut currently stands at around 60%. Morgan Stanley’s projection highlights a divergence between institutional forecasts and market expectations, as uncertainty over inflation and geopolitical developments continues to shape the outlook for US monetary policy.