Morgan Stanley predicts 7 Fed rate cuts by 2026

Morgan Stanley's research unit expects the Federal Reserve to cut interest rates seven times through the end of 2026, according to projections released today, June 25.

The easing cycle is expected to start in March 2026. By the end of that year, borrowing costs are projected to fall to a range of 2.5% to 2.75%.

Michael Gapen, chief US economist at Morgan Stanley, said tariffs are likely to drive inflation higher over the next three to six months.

He added that this inflation will likely prompt the Fed to delay rate cuts. As a result, the bank no longer expects any monetary easing in 2025.