Morgan Stanley Joins September Rate Cut Frenzy as Powell Pivots Policy

Wall Street's elite just got another player at the rate-cut table.

Morgan Stanley throws its hat in the ring for September reductions, following Jerome Powell's sudden shift in tone. The Fed chair's pivot from hawkish to dovish sent shockwaves through trading floors—and now major institutions are scrambling to adjust their forecasts.

Timing the Tide

Powell's nuanced language hinted at broader economic softening. Inflation metrics aren’t hitting targets, growth is cooling faster than expected, and the labor market? Let's just say it’s not the powerhouse it was last year.

Market Reactions

Traders immediately priced in higher odds of a cut. Bonds rallied, equities tilted upward, and the dollar took a brief hit. Classic pre-policy shift behavior—everyone’s trying to front-run the Fed.

Behind the Scenes

Morgan Stanley’s move isn’t purely analytical. When the Fed whispers, banks listen—and reposition. It’s all about managing client expectations and, of course, optimizing their own balance sheets. Because nothing says 'prudent risk management' like following the herd with a well-timed research note.

So here we are—another bank, another forecast, another race to sound smart about interest rates. Because in finance, sometimes the best trade is just agreeing with the person who prints the money.

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The change came right after Powell’s Jackson Hole speech, where he leaned more on signs of labor market weakness than on inflation. For Morgan Stanley, that was the signal the Fed is ready to ease sooner rather than later.

Wall Street Lines Up with the Outlook

Morgan Stanley is not standing alone. Other global banks including Barclays (BCS), BNP Paribas (BNPQY), and Deutsche Bank (DB) have also moved into the September cut camp. Their forecasts now call for easing this fall, with another round in December.

That swing in consensus has reset expectations across markets. Futures now price in better than an 80 percent chance of a September move. The question is less about if the Fed will cut and more about how DEEP and how fast.

Markets React to the Tone Change

Investors wasted no time adjusting. Stocks bounced back after a choppy week, while Treasury yields pulled lower as the curve flattened. Growth and tech names caught a bid again on hopes that cheaper borrowing is back on the table.

Still, analysts warn that this is not a one-way bet. If the Fed cuts too quickly and the data turns stubborn, Powell may have to slow down. That is why Morgan Stanley says this easing cycle will be measured rather than aggressive.

Data Still Holds the Key

Even with all the excitement, Powell’s speech stopped short of a firm commitment. The upcoming jobs, wages, and inflation numbers will decide if the Fed follows through in September.

If labor data weakens again, the case for a cut will be strong. If inflation refuses to budge, the Fed could hold steady and wait. For traders, that makes the next few weeks critical in deciding whether September delivers on the market’s expectations.