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Wall Street giants Morgan Stanley and Goldman Sachs revise their forecasts for Fed interest rates! Worst-case scenario revealed
The war between the United States and Iran has increased uncertainty and pushed oil prices higher, indirectly intensifying concerns about inflation.
Analysts are concerned that inflation — which the U.S. Federal Reserve (Fed) has long tried to bring down to its 2% target — could once again come under upward pressure due to rising energy prices.
Although there is currently speculation that the Fed might even raise interest rates amid inflation risks, there are differing opinions and expectations regarding the Fed’s future rate decisions.
According to economists at Morgan Stanley, the Federal Reserve could resume cutting interest rates in June.
However, the rise in oil prices caused by the conflict between the United States and Iran, along with the resulting inflation concerns, could delay rate cuts until the end of the year.
Morgan Stanley chief economist Michael Gapen and his team said in a research note that despite the upward pressure on inflation from rising energy prices, they maintain their forecast of a 25-basis-point rate cut in June and September.
However, they also noted the possibility that the Fed could postpone the first rate cut until September or December, and the second cut until 2027.
“If the Fed cuts rates earlier than expected while ignoring rising oil prices, that would be beneficial. However, in an environment of strong inflation and low unemployment, rate cuts could be delayed.”
These two factors are causing the Fed to hesitate on cutting interest rates. The timing of rate reductions may change, and the Fed could delay cuts until the end of 2026.
Goldman Sachs expects the Federal Reserve to cut interest rates by 25 basis points in September and December 2026.
This means the bank has revised its previous forecast, which predicted rate cuts in June and September.
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