Morgan Stanley preview the Federal Open Market Committee (FOMC) meeting June 11 and 12. MS are expecting the September meeting to kick off the rate cut cycle:
- Federal Reserve ... will likely start cutting its benchmark rate in September—a slower start than its European counterpart because of uneven data on inflation.
- cutting three times in 2024, reducing rates by a total of 75 basis points, followed by 100 basis points’ worth of cuts in 2025
- Fed’s path will be dictated by inflation data over the next two years
- prices should continue to moderate, suggesting that inflation will fall to the Fed’s 2% target by the end of 2025.
- we expect Chair Powell to emphasize patience as the Fed awaits more convincing data and to maintain a cutting bias
- do not expect markets to get much excitement from the dot-plot
- see an asymmetric risk toward lower yields emanating from the FOMC press conference
