Morgan Stanley: We expect a string Fed cuts through mid-2025; staying short USD/JPY

Morgan Stanley expects a series of 25 basis point rate cuts by the Fed through mid-2025, and recommends maintaining short positions in USD/JPY, targeting a move towards 138.

Key points:

1. Federal Open Market Committee Interest Rate Decision:

   • The Federal Open Market Committee cut the federal funds rate by 50 basis points to 4.875%reflecting continued progress in inflation and concerns about the labor market.

2. Economic Forecast Update:

   • The Summary of Economic Outlook (SEP) now indicates that four pieces This year, we saw a significant shift from previously expected, which is in line with declining inflation rates and labor market data.

3. Federal Reserve Commitment:

   • The larger initial cut signals the Fed’s commitment to staying ahead of inflationary pressures, and Chairman Powell stressed that future cuts will depend on incoming data.

4. Future Discounts Expectations:

   • Morgan Stanley expects two more issues 25 basis points This year’s sales and four more in the first half of 2015. 2025.

5. Forex Strategy:

   • The firm’s foreign exchange strategists recommend shorting the USD/JPY pair as the Fed continues its easing cycle.

conclusion:

Morgan Stanley’s forecast supports a short-selling strategy for USD/JPY in anticipation of continued Fed cuts, putting the dollar in a position of potential weakness as the easing cycle develops.

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