Morgan Stanley rate strategists expect the Federal Reserve to raise rates once in December and once again in March next year after a September hike, according to ChainCatcher. That path is less aggressive than current money-market pricing, which implies a total of 100 basis points of additional tightening over the next 12 months. The strategists said the Fed’s actual degree of tightening is unlikely to reach the level implied by the market. Their view rests on the idea that key factors shaping the policy outlook will not become clear until later this year. The call highlights a gap between a major Wall Street bank’s rate outlook and the path currently reflected in market pricing.
Morgan Stanley rate strategists expect the Federal Reserve to deliver one rate hike in December and another in March next year after a September increase, according to ChainCatcher.
Market pricing points to a more aggressive path. Money markets are currently pricing in a cumulative 100 basis points of rate hikes over the next 12 months.
The strategists said the Fed’s actual tightening is unlikely to reach the level implied by the market, as key factors will not become clear until later this year.
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