Fed forecast from Morgan Stanley

Morgan Stanley said it expects a 25 basis point rate hike in July, following Fed Chair Powell’s messages last week. After Fed Chair Jerome Powell signaled in his latest speech that the Fed is not yet done with its tough-hike cycle, Morgan Stanley said it expects a 25 basis point rate hike at the Fed’s July meeting. Economists including Ellen Zentner expect the bank to revise its expectations upward to an effective federal funds rate of 5.375% by the end of 2023, with the effective funds rate at 4.375% by the end of 2024. Morgan Stanley economists cited Powell’s statements that “it makes sense to raise rates, but at a more moderate pace” and that “people on the committee believe it’s appropriate to raise rates once or twice.”