In case you missed the news overnight: Trump’s Fed Board pick Miran has enough Senate votes to win
Morgan Stanley argues that while this puts Miran among the voting members, he is set to be the only dissenter in calling for a 50 bps rate cut tomorrow. The firm anticipates a 25 bps rate cut to be the expected outcome with the dot plots set to show two rate cuts for 2025 and two in 2026.
In justifying their call, Morgan Stanley points to historical precedence that “when Fed policy has been modestly restrictive, the central bank has opted for gradual easing”. Adding that there is not yet enough evidence of a labour market collapse to call for a panic move this week.
On Fed chair Powell’s speech, the firm expects a similar tone to Jackson Hole with Powell emphasising on downside risks to the labour market but reaffirming a more data-dependent approach.
Despite their more “cautious” call here, Morgan Stanley is expecting the Fed to cut rates consecutively through to January next year – starting with the one today.
