Morgan Stanley predict the Federal Reserve may not cut interest rates until June

<p>Fed may not cut interest rates until June, Morgan Stanley economists warns
Morgan Stanley said the next few inflation prints could be sticky and the Federal Reserve may not begin cutting interest rates until later than many expect.

“We think it will take until June for the Fed to have clear and convincing evidence inflation will return to the 2% target, and therefore begin cutting rates,” Ellen Zentner, the firm’s chief economist told clients.

That could be bad news for stocks, which have rallied this month to end an already-strong year. Investors have been growing increasingly optimism about the potential for the central bank to pull down rates starting in March.</p><p>Analysts at Morgan Stanley, in their most recently updated US Eccnomimcs report, say that the Federal Reserve's Federal Open Market Committee (FOMC) will not cut the Fed Funds rate until the June meeting, as it'll wait for "clear and convincing" on the CPI:</p><ul><li> “We think it will take until June for the Fed to have clear and convincing evidence inflation will return to the 2% target, and therefore begin cutting rates”</li><li>expect higherr CPI readings in the next two months citing sticky services inflation, and see the six-month core PCE inflation rate gradually increasing in the first quarter of next year “as weak prints over the summer drop out of the window and sticky services inflation remains elevated”</li></ul><p>MS caveat their June call by saying a cut could come sooner. For a March rate cut the FOMC would need to see:</p><ul><li>less than 50,000 non-farm payrolls and core CPI at below 0.2% month-over-month</li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.