Analysts See Fed Cutting Interest Rates in September

$MS, $GS

Morgan Stanley (NYSE:MS) analysts said Monday that they now expect the Federal Reserve to cut rates in September and then again in October.

“Trade’s ‘simmer’ has begun to boil, business sentiment and capex have softened further, global growth remains weak and inflation expectations have fallen,” while the gap between 3-month US3MT=RR and 10-year US government bonds US10YT=RR points to overly restrictive monetary policy, the investment bank’s analysts said in a note to clients Monday.

The analysts previously predicted a cut in October alone, saying the central bank would “wait for further evidence that downside risks are weighing on the economy.”

The Wall Street bank joins a number of investors betting that the Fed’s 1st rate cut since Y 2008, late last month, will be the 1st of several moves to lower borrowing costs.

Goldman Sachs (NYSE:GS) said earlier this month it sees a strong chance of rate cuts in both September and October.

Morgan Stanley is 1 of 24 primary dealers that can trade directly with the Fed’s main market desk in New York.

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