Morgan Stanley Delays First Rate Cut to Late 2027 Amid Rising Inflation

Huo Xing Finance reports that the U.S. CPI increased by 3.8% year-over-year in April, the highest level since May 2023 and above the market expectation of 3.7%. Previously, on May 8, Bank of America economists stated in a client report that, due to persistent inflation pressures exceeding expectations and robust job growth, they had abandoned their earlier forecast of two 25-basis-point rate cuts in September and October of this year, and now expect the first rate cut to occur in the second half of 2027. The earlier view was based on the expectation that Donald Trump would nominate Kevin Warsh to succeed Powell as Fed Chair, suggesting a more accommodative policy stance. However, with evolving economic conditions, this perspective has shifted. The report noted, “We no longer expect the Fed to cut rates this year.” It also highlighted that multiple shocks affecting the economy—including the Iran conflict, tariffs, and the rise of artificial intelligence—have made forecasting interest rate movements significantly more challenging.