Morgan Stanley expects the Fed to deliver a second consecutive 25 bps rate cut this week, bringing the Fed funds rate to 3.75% to 4.00%. The absence of major US economic data amid the government shutdown won't put off the Fed for now but any guidance in reference to next year will remain uncertain. As such, expect Fed chair Powell to keep an emphasis on data dependency and risk management.
But at the balance, the firm expects the Fed to maintain an easing bias in signaling further likelihood of more rate cuts to come. However, any clarity beyond year-end may be more limited amid a lack of new economic data releases for now.
Their call here fits with what all other analysts are anticipating, in expecting the Fed to cut by 25 bps this week. For December, there's only BofA, CIBC, and RBC that are expecting the Fed to skip a meeting after the rate cut this week.
