Morgan Stanley drops forecast for 25-bp rate cut in December

Morgan Stanley dropped its forecast for a 25-basis-point Federal Reserve rate cut in December following stronger-than-expected September employment data.

The official figures, released Thursday after delays linked to the government shutdown, showed the US economy added 119,000 jobs versus expectations of 50,000, while the unemployment rate climbed to a four-year high of 4.4%.

Morgan Stanley analysts, as reported by Reuters, said the sharp rebound in hiring suggests the summer slowdown may have been overstated and that labor-market strength points to underlying stability even as unemployment edges higher.

The Fed is expected to slash rates in January, April, and June 2026 to a range of 3%–3.25%, Morgan Stanley added.