Morgan Stanley joins the bandwagon in expecting the Fed to cut rates in December
Morgan Stanley now expects the Federal Reserve to cut interest rates by 25 basis points in December, revising their previous stance of no rate cut. They also anticipate another 25 bps cut in April 2026, targeting a Fed funds rate range of 3.00% to 3.25%. Currently, traders are pricing in an 86% chance of a December rate cut and 44 bps worth of cuts by April next year.
The firm previously saw no rate cut by the Fed for December but now revises that call to a 25 bps rate cut for next week. Adding to that, they also see another 25 bps rate cut in April 2026. And that will take the Fed funds rate to their terminal target range of 3.00% to 3.25%.
As things stand, traders are pricing in ~86% odds of a 25 bps rate cut by the Fed for December currently. And by April next year, there is roughly 44 bps worth of rate cuts priced in at the moment.
