Morgan Stanley recently reversed its prior view and now expects Federal Reserve (the Fed) to cut interest rates by 25 basis points (bps) at its December 2025 meeting.

✅ Morgan Stanley had previously assumed no rate cut for December. But after a wave of “dovish” signals from several Fed officials, plus softer U.S. economic/labor data in recent weeks, the firm reversed course — saying it “jumped the gun.”
Now they anticipate a 25 bps cut in December 2025, followed by further cuts in January and April 2026 — bringing their projected terminal fed funds rate to roughly 3.0%–3.25%.
📊 The odds of a December cut, according to the CME Group FedWatch tool, are now priced at over 87 %.
Other major firms — such as J.P. Morgan and Bank of America Global Research — have also adjusted their forecasts to expect a December rate cut.

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