Morgan Stanley’s chief economist said the bank continues to expect no Federal Reserve rate hikes in 2026 after taking a closer look at Warsh. The firm maintained its baseline call for no hikes through the year and did not signal a shift toward a more hawkish outlook. At the same time, the economist pushed back on a popular market narrative that artificial intelligence will inevitably lead to rate cuts, saying that view is “almost certainly wrong.” The remarks suggest Morgan Stanley sees little reason, for now, to revise its core policy outlook and remains skeptical of attempts to draw a direct line between AI adoption and easier monetary policy.
After taking a closer look at Warsh, Morgan Stanley’s chief economist said the firm still expects the Federal Reserve to avoid any rate hikes in 2026. The bank is keeping its baseline forecast unchanged and has not moved toward a more hawkish policy view for the year.
He also directly challenged a popular market narrative, saying the idea that AI will inevitably lead to rate cuts is “almost certainly wrong.” The comment signals that Morgan Stanley does not accept a simple link between advances in AI and an automatic easing path from the Fed.
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