<div id="readability-page-1"><p>The U.S. Federal Reserve is likely to remain on hold with interest rates amid signs of rising inflation and a weak economy, says Wall Street investment bank Morgan Stanley (MS).</p><h3>Claim 70% Off TipRanks Premium</h3><ul><li>Unlock  hedge fund-level data  and  powerful investing tools  for smarter, sharper decisions  </li><li> Stay ahead of the market with  the latest news and analysis  and maximize your portfolio's potential</li></ul> <p>Analysts at Morgan Stanley expects the U.S. central bank to &#34;remain on hold and retain its easing bias&#34; in the face of difficult economic data, as well as spiking crude oil prices that are hovering around $100 per barrel following military attacks on Iran.  </p> <p>Morgan Stanley's Chief U.S. economist Michael Gapen is now projecting only one interest rate cut this year, likely in the autumn, and one cut in 2027. Those moves by the Fed are likely to keep the central bank's terminal rate in a range of 3% to 3.25%.</p> <h2><strong>What the Data Says About the U.S. Economy</strong></h2> <p>&#34;The oil price shock should mean higher headline inflation forecasts, but models and past Fedspeak suggest the Fed will look through energy price pressures,&#34; Gapen said.</p> <p>The bank expects the Fed to hold rates, with three dissents in favor of a cut, up from two in January.</p> <p>Gapen noted that Governors Bowman, Waller and Miran have all signaled support for rate reductions.</p> <p>&#34;We have high conviction that the Fed will not respond with rate hikes,&#34; he wrote, adding that appropriate policy &#34;calls for the Fed to 'look through' energy price pressures … and stay on hold or cut rates if activity weakens.&#34;</p> <p>Updated projections should show higher headline inflation and softer growth, but an unchanged dot plot.</p> <p>In markets, Morgan Stanley recommends a neutral stance on U.S. Treasury duration, staying long 2-year SOFR swap spreads, and remaining received in June FOMC OIS.</p> <p>On currencies, the firm sees downside risks to the U.S. dollar if Chair Jerome Powell emphasizes that the Fed is looking past energy-driven inflation, though &#34;oil market developments&#34; will remain central to FX trading.</p> </div>

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<p>Morgan Stanley predicts that the U.S. Federal Reserve will maintain interest rates amid rising inflation and a weak economy. Chief U.S. economist Michael Gapen forecasts only one rate cut this year, likely in autumn, and another in 2027, keeping the terminal rate between 3% and 3.25%. The bank advises a neutral stance on U.S. Treasury duration and notes potential downside risks for the U.S. dollar if the Fed overlooks energy-driven inflation.</p>

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Don't Expect Interest Rate Cuts Anytime Soon, Says Morgan Stanley (MS)