Morgan Stanley economists, led by chief US economist Ellen Zentner, expect the Federal Reserve to make deep interest-rate cuts over the next two years as inflation cools.
The central bank will start cutting rates in June 2024, then again in September, and every meeting from the fourth quarter onward, each in 25-basis point increments, the investment bank said in their 2024 outlook.
Therefore, the policy rate will decrease to 2.375% by the end of 2025.
Morgan Stanley sees a weaker economy that warrants a greater magnitude of easing, though no recession. They expect unemployment to peak at 4.3% in 2025.
Separately, Goldman Sachs economist David Mericle expects the first 25-basis-point reduction in the fourth quarter of 2024, followed by one cut per quarter through mid-2026 and a total of 175 basis points, with rates settling at a 3.5%-3.75% target range.
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