Morgan Stanley, Deutsche Bank Expect Three Fed Rate Cuts in 2024

Morgan Stanley and Deutsche Bank have both raised their forecasts for Federal Reserve interest rate cuts in 2025, now expecting three 25 basis point reductions at the September, October, and December meetings, up from their previous forecasts of only two cuts. Morgan Stanley projects an even faster pace, anticipating four consecutive cuts through January 2026, with two additional cuts possible in April and July 2026, citing softening inflation and weakening labor market conditions as enabling factors. Deutsche Bank, while more conservative on 2026 cuts, acknowledges risks skewed towards further reductions depending on inflation and labor market trends. These revised forecasts reflect a shift toward a more accommodative monetary policy stance aimed at stimulating economic growth amid signs of easing inflation and labor market pressures. Market pricing supports these expectations, with a 95% probability of a 25 basis point cut at the upcoming September Fed meeting. These developments suggest increased liquidity and potentially lower borrowing costs for consumers and businesses in the near term.