Morgan Stanley has withdrawn its forecast for a U.S. Federal Reserve rate cut in June, citing rising inflation risks stemming from Trump’s newly announced tariffs. The bank now expects the Fed to hold rates steady through to March 2026.
Trump announced sweeping tariffs on US imports on Wednesday, higher duties targeting dozens of countries. Morgan Stanley warned these measures could fuel “tariff-induced inflation,” making it unlikely the Fed will proceed with any rate cuts this year.
Previously, the Wall Street firm had anticipated a 25 basis point cut in June. However, with inflationary pressures now expected to remain elevated, the firm believes the Federal Open Market Committee (FOMC) will delay any policy easing until inflation stabilises.
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This conflicts with other analysts expecting Fed cuts on the back of weakening US economic growth (even recession) with the tariff hit.