Morgan Stanley expects US Fed to deliver September rate cut as Powell shifts tone

Aug 26 (Reuters) - Morgan Stanley expects the U.S. Federal Reserve to begin cutting interest rates in September, from its earlier view of the Fed staying on hold until March 2026, after Chair Jerome Powell signaled a shift in focus toward labor market risks in remarks at Jackson Hole.

In a note dated Monday, the brokerage forecast a 25-basis-point cut next month, followed by another in December, and quarterly reductions through 2026 to a terminal rate of 2.75%-3.0%.