Adding 25 bps to the May FOMC meeting – Morgan Stanley

Morgan Stanley upwardly revised its Federal Reserve (Fed) rate forecasts after Fed Chair Jerome Powell’s speech.

The investment bank unveiled a 0.25% rate hike expectation for the March meeting after a strong US jobs report on Friday, before conveying hopes of 25 basis points (bps) Fed rate hike in May following Powell’s speech.

The same brings Morgan Stanley’s expectation for the peak rate to 5.00% to 5.25% as per the latest forecasts.

It should be noted, however, that Fed’s Powell showed hesitance in praising the latest jump in the US Nonfarm Payrolls (NFP) during the latest appearance while asked the same of being a force to the Fed's benchmark interest rate higher than the 5% to 5.25% range currently anticipated. The same suggests a pause in the Fed rate after currently priced-in two rate hikes worth 0.25%.

Also read: Fed's Powell: Jobs report was strong, need to do further interest rate increases