Morgan Stanley now expects the Federal Reserve to raise interest rates at its July meeting, after Chair Jerome Powell signaled the central bank isn’t done with its aggressive hiking cycle just yet.“We now judge that the bar for a July hike is significantly lower than we had initially expected,” economists including Ellen Zentner wrote in a research note published Tuesday. They said they see the Fed making a hike of 25 basis points next month.
Some Fed watchers were puzzled earlier this month after policymakers held rates steady while at the same time forecasting that additional hikes would still be needed to bring inflation under control.
That led Powell last week to try and dispel any notions that future rate increases were off the table. In presenting the Fed’s semiannual economic update to Congress, the Fed chair insisted that “the process of getting inflation down to 2 per cent has a long way to go.”
The Morgan Stanley economists cited Powell’s remarks in their forecast update, noting that Powell made clear he was among those on the committee who felt strongly that rates should be higher.