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source:Reuters
content:
Renovations continue at the Federal Reserve Board building in Washington, D.C., U.S., November 14, 2025. REUTERS/Elizabeth Frantz/File Photo Dec 5 (Reuters) - Morgan Stanley said on Friday it now expects the U.S. Federal Reserve to deliver a quarter-percentage point rate cut in December, joining peers [J.P.Morgan](/business/jp-morgan-shifts-outlook-fed-rate-cut-december-2025-11-27/) and [BofA Global Research](/business/bofa-expects-december-fed-cut-two-more-2026-2025-12-01/), following dovish remarks from central bank policymakers.
All three brokerages previously expected the Fed to hold rates steady in December.
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Softer U.S. [economic](/business/retail-consumer/us-retail-sales-miss-expectations-september-2025-11-25/) data released late November and dovish comments from key Fed officials, including from New York Fed President and the Federal Open Market Committee Vice Chair [John Williams](/business/feds-williams-says-fed-can-still-cut-rates-near-term-2025-11-21/), Fed Governor [Christopher Waller](/business/feds-waller-december-cut-is-appropriate-action-january-more-uncertain-given-2025-11-24/) and San Francisco President Mary Daly, have bolstered expectations for a cut.
"It seems we jumped the gun," Morgan Stanley strategists said. "We expect dissents, and Chair Powell will likely trade the cut for language changes in the statement that signal further cuts will have a higher bar."
Traders are currently pricing in a 87.2% chance of a quarter-point interest rate cut at the monetary policy meeting on December 9-10, as per the CME FedWatch Tool.
In addition, Morgan Stanley now expects the Fed to reduce rates in January and April by 25 basis points each to a terminal rate of 3.0%-3.25%, revised from a previous forecast of a cut each in January, April and June.
"We expect Chair Powell to signal that the recalibration phase of monetary policy is now complete. Any additional adjustments will be considered on a meeting-by-meeting basis and guided by incoming data," they said.
Meanwhile, J.P.Morgan expects another cut in January, while BofA forecasts a cut each in June and July next year.
Reporting by Kanchana Chakravarty in Bengaluru; Editing by Janane Venkatraman
Our Standards: [The Thomson Reuters Trust Principles., opens new tab](https://www.thomsonreuters.com/en/about-us/trust-principles.html)
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article_id:4579 →
content_type:article
title:Jumped the gun, says Morgan Stanley; reverses Dec Fed rate call to 25bps cut