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Morgan Stanley Says Fed to Cut Half a Percentage Point in July

The Marriner S. Eccles Federal Reserve building.

The Marriner S. Eccles Federal Reserve building.

Photographer: Andrew Harrer/Bloomberg

Morgan Stanley sees the Federal Reserve cutting its key interest rate by half a percentage point this month, even after last Friday’s strong U.S. jobs report.

“A strong policy response is necessary to guard against risks of a further, sharper loss of economic momentum,” Morgan Stanley economists led by Chetan Ahya wrote in a note. Risks remain skewed to the downside and a significant hit to growth could emerge if financial conditions tighten, pushing corporate credit risks to the fore, they warned.