Morgan Stanley Sees Risks That Oil Shock Will Delay Next Fed Cut

The Federal Reserve will likely resume cutting interest rates as soon as June, though there’s a risk the next move may be delayed by the oil-price shock caused by the Iran war, according to Morgan Stanley.

The bank’s economists are sticking with their previous call that the Fed will make two quarter-point cuts this year — in June and September — even as higher energy prices threaten to worsen inflation. But they see a possibility that the central bank could either delay its first reduction until September or even December, either of which could push the next reduction into 2027.