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Morgan Stanley announced that the likelihood of a 25 basis point rate cut by the Fed at its December meeting has increased.
The bank stated that recent Fed communications and market pricing support this expectation, but added that some members may vote against the decision and that Chairman Jerome Powell is likely to balance the reduction with an emphasis on “data dependence.”
According to the agency, a significant portion of critical Q4 data on employment, spending, and inflation will be finalized by the January meeting. Therefore, Morgan Stanley continues to expect further rate cuts in January and April following the December cut.
The report also included assessments of consumer spending. While early Black Friday spending appeared “better than expected,” it noted that this data has historically not reliably predicted November-December retail sales. It also noted that the increase in nominal spending was largely due to higher prices, suggesting that actual consumer demand may be weaker.
*This is not investment advice.