【US Rate Cuts】Morgan Stanley Overlooks Oil Price Surge Impact, Still Expects Fed to Resume Rate Cuts in June and Cut Again in September

SocialAnxietyStaker · 2026-03-17T00:55:09+00:00

The U.S. and Israeli conflict with Iran has driven up oil prices, affecting market expectations for rate cuts. Morgan Stanley still predicts the Federal Reserve will cut rates in June and September, but the risk is that rate cuts could be delayed until 2027. The market expects a 60% probability of a rate cut in September, with a possible single cut in that month.

SocialAnxietyStaker

2026-03-17 00:55:09

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The war between the United States and Israel against Iran has caused oil prices to surge, prompting the market to lower expectations for rate cuts this year. However, Morgan Stanley maintains its forecast that the Federal Reserve will restart rate cuts in June and cut again in September, contrasting with market pricing.

Morgan Stanley Chief U.S. Economist Michael Gapen said, “We still believe there is a risk of delays in June and September.” Gapen added that the central bank could postpone the first rate cut until September or even December, and in either case, the next cut might be pushed back to 2027.

“The main risk to our view is that the longer the Fed waits, the more likely it will need to implement an additional rate cut afterward.”

After the outbreak of the Iran war, oil prices soared, potentially leading to inflationary pressures that could limit the Fed’s room to ease monetary policy. Currently, futures tied to the Fed’s policy rate are expected to cut by 25 basis points in December. The market sees a 60% chance of a 25 basis point cut in September.

According to CME Group’s FedWatch tool, the market expects only one rate cut this year, in September.

▲ [U.S. Rate Cut] Morgan Stanley Does Not React to Oil Price Surge, Still Predicts the Fed Will Restart Rate Cuts in June and Cut Again in September

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