Morgan Stanley, a senior U.S. economist in charge of the U.S., said the Fed’s rate hike seems to be over for now. It is argued that interest rate cuts will begin in March next year as well as skipping the Fed’s Federal Open Market Committee (FOMC) in November, where the possibility of a rate hike is mentioned once.
According to Bloomberg News on the 24th (local time), Morgan Stanley Chief Economist Elon Zentner made the remarks on Bloomberg Podcast.
Zentner from Morgan Stanley explained that as inflation cools, the Fed’s likely to keep interest rates unchanged until it is ready to cut rates next year. It also mentioned the possibility that the Fed will not be able to make interest rate decisions due to lack of information if the U.S. federal government shuts down.
In the meantime, Zentner also predicted that the Fed’s rate cut will begin in March next year. He said the Fed expects two rate cuts next year, but he expects a quarter-point quarterly cut, suggesting that he thinks inflation will continue to slow down. Gentner, however, did not completely rule out other possibilities, saying that the Fed left the door open for further interest rate hikes.
Earlier, the Fed announced after the FOMC on the 20th that it would maintain its key interest rate in the current range of 5.25-5.50%, but at the same time, 12 out of 19 participants expected an additional rate hike this year, which was evaluated as a hawkish freeze.
However, there is an interpretation that the central bank’s principle position is wary of a resurgence in inflation regarding the expectations and investigations of Fed personnel. Last month, the Wall Street Journal (WSJ) evaluated Fed Chairman Jerome Powell’s remarks, which adhere to a hawkish attitude, saying, “No matter what he said, the U.S. rate hike is likely to be over.”
In this regard, the Financial Times (FT) reported that evidence that economic activity is slowing globally has made central banks convinced that no additional rate hikes are needed. “We have reached a milestone in the global fiscal policy cycle,” said Jennifer McKeon, an economist at Capital Economics. “The tightening is over.” Capital Economics expected the world’s top 30 central banks to choose a cut rather than a rate hike in the next quarter for the first time since 2020, FT said.
