Morgan Stanley and Deutsche Bank both raised expectations for interest rate cuts: The Federal Reserve may cut interest rates three times in September, October, and December.

According to the latest forecasts from Morgan Stanley and Deutsche Bank, the Federal Reserve may cut interest rates by 25 basis points in the remaining three meetings of the year (September, October, December), a significant upgrade from the previous expectations of only rate cuts in September and December by both institutions. This adjustment is based on last week's data showing easing inflation pressure and signs of continued slowdown in the job market. The market generally expects the Federal Reserve to start cutting rates at this week's policy meeting, marking the first time since December 2024 that they will restart a loosening cycle. Federal Reserve Chairman Jerome Powell has already hinted that a rate cut may happen at the September 16-17 meeting, emphasizing rising risks in the labor market and warning that inflation threats still exist. Morgan Stanley further points out that the current market environment allows the Federal Reserve to adopt a more neutral policy stance faster, and they may start cutting rates by 25 basis points at each of the next four meetings, until January next year. They also predict two more rate cuts in April and July 2026. Deutsche Bank's Chief U.S. Economist Matthew Luzzetti believes that although the current forecast does not include further rate cuts in 2026, if inflation and labor market trends do not align with levels below the neutral rate, the risk will lean towards more rate cuts. According to the Chicago Mercantile Exchange's FedWatch Tool, traders are betting with a 95% probability on a 25 basis point rate cut next week, with only a 5% probability of a more aggressive 50 basis point cut. It is worth noting that after weak labor data in August, Standard Chartered became the only institution predicting a 50 basis point rate cut this month, contrasting sharply with mainstream expectations.