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<h3>A DOVISH HOLD? WHAT TO EXPECT FROM THE FED</h3>
The Federal Reserve may strike a dovish tone at its monetary policy meeting next week, even as it is widely expected to keep rates on hold, according to Morgan Stanley.
Recent data showing a stabilizing labor market likely justifies a pause, but the potential for disinflation later this year means the U.S. central bank will maintain an easing bias, the bank’s chief U.S. economist Michael Gapen and other analysts said in a report.
“The key question at this meeting will be how Powell communicates the pause: is it a “dovish hold” in which he continues to emphasize that the outlook supports further rate cuts, or will Powell signal a more durable pause? We expect the former,” they said.
Morgan Stanley expects the Fed’s statement to maintain the following language – “in considering the extent and timing of additional adjustments to the target range” – which the bank says implies an easing bias in line with the median policy path in the Summary of Economic Projections. Policymaker projections issued after the Fed’s December meeting showed a median expectation for a single quarter-percentage-point cut this year, though it was accompanied by a wide range of estimates that starkly illustrated the depth of disagreement about where to take monetary policy in 2026.
Fed funds futures traders are pricing in 43 basis points of cuts by year-end, implying expectations of two 25-basis-point rate reductions.
(Karen Brettell)
EARLIER ON LIVE MARKETS: THE GOOD, THE BAD, AND THE UGLY: FLASH PMI, UMICH, AND A LATE-TO-THE-PARTY LEI CLICK HERE US STOCKS MIXED EARLY FRIDAY, BUT ON PACE FOR WEEKLY DIPS CLICK HERE BREWERY SHARES MAY GET THEIR BEST ASSIST YET FROM FIFA WORLD CUP THIRST CLICK HERE S&amp;P 500 ENERGY SECTOR STOKED FOR A STRONG 2026? CLICK HERE UK RETAIL SALES REBOUND IN DECEMBER, BUT OUTLOOK FRAGILE CLICK HERE EARNINGS CAN SHIELD EQUITIES FROM GEOPOLITICAL NOISE CLICK HERE EUROPE’S BANK BUYBACK BOOST FADING - UBS CLICK HERE SOFT END TO HECTIC WEEK CLICK HERE EUROPE BEFORE THE BELL: FUTURES LOWER, STOCKS SET FOR WEEKLY FALL CLICK HERE TRUMP’S ARCTIC PANTOMIME CHILLS THE DOLLAR CLICK HERE ( )

The Federal Reserve is expected to adopt a dovish tone at its upcoming monetary policy meeting, maintaining interest rates while signaling a potential for future cuts. Recent labor market data supports this pause, with Morgan Stanley analysts suggesting that Fed Chair Powell will emphasize an easing bias in his communication. Fed funds futures indicate expectations of two 25-basis-point cuts by year-end. Meanwhile, U.S. stock markets show mixed performance, with the Nasdaq and S&P 500 up, while the Dow dips. Energy leads sector gains, and the dollar is down, with gold and bitcoin both rising.

- The U.S. stock market shows mixed results with Nasdaq and S&P 500 in positive territory while the Dow slips.  
- Morgan Stanley anticipates the Federal Reserve will use a dovish tone at its upcoming meeting, potentially signaling a pause in rate hikes amid stabilizing labor market data.  
- Market expectations include a possible 43 basis points cut by year-end, reflecting uncertainty about the future direction of monetary policy.

LIVE MARKETS-A dovish hold? What to expect from the Fed