Morgan Stanley has announced that the likelihood of a 25 basis point rate cut by the Federal Reserve at its December meeting has increased.
The bank stated that recent communications from the Fed and current market pricing support this expectation. However, they also noted that some members might vote against the decision, and Chairman Jerome Powell is likely to balance the reduction with an emphasis on "data dependence."
Outlook for Future Rate Cuts
According to Morgan Stanley's assessment, a significant portion of critical fourth-quarter data concerning employment, spending, and inflation will be finalized by the January meeting. Consequently, the bank continues to anticipate further rate cuts in January and April, following the expected cut in December.
Analysis of Consumer Spending
The report also provided assessments of consumer spending trends. While early Black Friday spending appeared "better than expected," the report cautioned that this data has historically not reliably predicted November-December retail sales. It was also noted that the increase in nominal spending was largely attributed to higher prices, suggesting that actual consumer demand might be weaker.