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Jun 06 - 02:55 PM

Morgan Stanley: Our Expectations for Next Week's June FOMC Meeting

By eFXdata  —  Jun 06 - 01:30 PM


Morgan Stanley outlines their expectations for the upcoming June FOMC meeting, anticipating the Fed will maintain its current rate while adjusting its economic projections. Key focus areas include the FOMC statement, the Summary of Economic Projections, and Chair Powell's press conference, all of which are expected to emphasize a cautious approach while signaling potential rate cuts later in the year.

Key Points:

  1. Rate Decision and FOMC Statement:

    • The FOMC is expected to keep the federal funds rate unchanged at 5.375%.
    • The statement will likely describe progress on inflation as having slowed rather than stalled, reflecting recent inflation trends.
  2. Summary of Economic Projections:

    • Anticipation of a shift in the Summary of Economic Projections from three rate cuts to two for this year, aligning with stronger-than-expected inflation data in Q1.
    • This adjustment marks a response to current economic conditions and data trends.
  3. Press Conference Highlights:

    • Chair Powell is expected to emphasize patience and the need for more convincing data before making any changes to monetary policy.
    • Powell will likely maintain a bias towards future rate cuts, indicating a cautious approach to economic developments.
  4. Market Reactions and Yield Expectations:

    • Morgan Stanley's rates strategists do not foresee significant market excitement from the updated dot-plot but anticipate asymmetric risks toward lower yields stemming from the press conference and the preceding CPI print.
    • The recommendation is to hold 3m10y receivers, anticipating potential market movements.
  5. USD Reaction:

    • Given recent shifts in market pricing and economists' expectations of only slight changes to forecasts, Morgan Stanley predicts minimal USD reaction to the FOMC's announcements.


Morgan Stanley expects the FOMC to maintain its current rate at the upcoming June meeting, with slight adjustments to its economic projections reflecting recent inflation data. Chair Powell's emphasis on patience and cautious forward guidance is anticipated to maintain a cutting bias, setting the stage for potential rate cuts starting in September. Market reactions are expected to be muted, with a focus on the details of the press conference and incoming economic data.

Morgan Stanley Research/Market Commentary


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