I posted earlier on analysts at Morgan Stanley's Federal Open Market Committee (FOMC) forecast:
Separately, the portfolio solutions CIO at Morgan Stanley Investment Management was interviewed on bbgt TV on Wednesday, and he leans towards very aggressive cuts indeed, saying the Fed would like to get to a real yield (nominal Fed Funds rate minus inflation) around 1.5% as its neutral level:
- so if we look at nominal Fed Funds today at 5.5% and let's say US inflation is at 3% that means real policy rates are at 2.5% which means that the FED could cut a 100 basis points just to get to their neutral level
- there's like six rate cuts priced in but remember 100 basis points of those rate cuts is really just getting to neutral, and they don't start really easing until they start doing more than 100
He goes on to discuss the Fed's attitude to the equity rally:
- if the markets are rallying that's okay with the Fed, the Fed doesn't have to push back on on a rally because they don't like a rally that's not their job effectively what they're saying is can we get this rally and can inflation also stay low and if the answer is yes to both then they don't care if if the market continues to rally
Full interview
