Morgan Stanley economists are forecasting that the FOMC (Federal Open Market Committee) will make deep cuts on interest rates over the next two years. According to Morgan Stanley, FOMC will make these changes due to the cooling of inflation. On the other hand, Goldman Sachs expects fewer reductions on rates of interest, as well as a later start.
According to Bloomberg.com,
“The central bank will start cutting rates in June 2024, then again in September, and every meeting from the fourth quarter onward, each in 25-basis point increments, Morgan Stanley researchers led by chief US economist Ellen Zentner said in their 2024 outlook on Sunday. That’ll take the policy rate down to 2.375% by the end of 2025.”
Both financial institutions reflected differing perspectives on the trajectory of the United States economy. Furthermore, they also expect the right response from the US central bank. According to them, these predictions also have different implications for financial markets. These forecasts actually shed light on the complexity of economic indicators, institutional perspectives, and policy decisions.
Morgan Stanley’s analysts expect the economy to be weaker, which will lead to a high easing of rates. However, they do not expect a full-scale recession to happen.
On the other hand, Goldman Sachs expects the Federal Reserve to make cuts later and maintain relatively high rates of interest. This is due to the fact that Goldman Sachs expects post-financial crisis headwinds resolutions and foresees that larger budget deficits will remain.
Such projections from these two popular financial institutions have strong implications for stakeholders. Furthermore, these forecasts will also influence borrowing costs, consumer spending, and investment decisions.
A passionate writer and an avid reader, Soumava is academically inclined and loves writing on topics requiring deep research. Having 3+ years of experience, Soumava also loves writing blogs in other domains, including digital marketing, business, technology, travel, and sports.