Economists at Morgan Stanley provided insights into recent economic data and their implications for potential Fed rate cuts.
Morgan Stanley said in a note to clients on Friday that while market pricing has shifted in favor of two interest rate cuts this year, the FOMC meeting in July is now viewed as a "reasonable face-to-face meeting."
Accordingly, “the market is still underestimating the number of interest rate moves this year.” However, the brokerage added that more evidence is needed for the Fed to start cutting interest rates.
This shift in expectations comes in the wake of a series of economic reports, including April jobs numbers and retail sales data, which indicated a move from previous upward surprises to downward surprises.
Economists concluded that while a rate cut in July may be premature, three cuts over the course of the year may be appropriate.
