Finance
Morgan Stanley, Deutsche Bank expect three US interest rate cuts this year
Published by Global Banking and Finance Review
Posted on September 12, 2025
2 min readLast updated: January 21, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on September 12, 2025
2 min readLast updated: January 21, 2026
Morgan Stanley and Deutsche Bank expect three US interest rate cuts in 2023 due to modest inflation pressures, with traders anticipating a 25-bps cut next week.
By Joel Jose and Akriti Shah
(Reuters) - Morgan Stanley and Deutsche Bank expect the U.S. Federal Reserve to deliver interest rate cuts at all its three meetings this year, following data this week showing more modest inflation pressures.
The two brokerages in separate notes said on Friday they now expect the Fed to cut rates by 25 basis points at each of its remaining meetings in September, October and December.
The firms previously forecast one 25-basis-point cut each in September and December.
The Fed is widely expected to kick off a new easing cycle in next week's policy meeting - its first since the 25-bps rate cut in December 2024 - after recent data pointed to a slowdown in the job market.
Last month, Fed Chair Jerome Powell signaled a rate cut was possible at the September 16-17 policy meeting, citing rising labor market risks, while cautioning that inflation remained a threat.
Morgan Stanley said market conditions give the Fed room to move more quickly toward a neutral policy stance.
According to the Wall Street brokerage, the Fed is likely to deliver four back-to-back 25-bps rate cuts starting next week and continuing through January, with two further cuts projected for April and July 2026.
"While we currently do not have additional rate cuts in our forecast for next year, given that our inflation and labor market forecasts are inconsistent with rates below neutral, risks are skewed towards more reductions in 2026," said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.
Traders have priced in a 95% chance of a 25-bps rate cut next week, according the CME FedWatch Tool, with a slim 5% chance of a deeper 50-bps cut.
After a soft August labor print, Standard Chartered emerged as the only brokerage predicting a 50-bps rate cut by the Fed this month, diverging from the broader consensus.
(Reporting by Joel Jose and Akriti Shah in Bengaluru; Editing by Maju Samuel)
An interest rate is the percentage of a loan or deposit that is charged as interest to the borrower or paid to the depositor, typically expressed on an annual basis.
Monetary policy refers to the actions taken by a country's central bank to control the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation and stabilizing currency.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equal to 0.01%.
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