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    Morgan Stanley updates predictions, expecting the Fed to cut rates in three upcoming meetings.

    by VT Markets
    /
    Sep 12, 2025
    Morgan Stanley now expects the Federal Reserve to cut interest rates in its meetings for September, October, and December. Before, they only predicted cuts for September and December. Looking ahead to next year, Morgan Stanley predicts the Fed will lower rates by 25 basis points in January, April, and July. This shows how quickly financial forecasts can change.

    The Nature Of Economic Forecasts

    The firm’s updated prediction highlights how forecasts can evolve. Traders should be careful not to rely only on analyst predictions when making decisions. The outlook now anticipates rate cuts from the Federal Reserve in all three meetings left this year, starting with next week. This change is mainly due to recent signs of a slowing economy. For instance, last week’s August jobs report revealed only 85,000 new jobs, and the latest CPI data showed core inflation dropped to 2.8%. In response, we can expect more activity in interest rate derivatives linked to short-term rates. The price of futures contracts on the 2-Year Treasury note is likely to rise as the market adjusts to these more aggressive cuts. This offers a chance for traders looking to profit from falling yields as the year ends.

    Opportunities And Risks For Traders

    This dovish shift also benefits stocks, potentially making call options on indices like the S&P 500 more appealing. However, the swift change in forecasts creates uncertainty. This could push the VIX index higher from its current level around 17. Traders might want to explore strategies that take advantage of increased price swings leading up to the October and December meetings. We’ve seen similar swift changes before, such as in late 2018 when the Fed quickly moved from raising rates to pausing. That time was marked by notable market volatility as traders rushed to adjust their expectations. This current situation suggests we should be ready for similar shifts in the coming months. Create your live VT Markets account and start trading now.

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