Headline: Morgan Stanley Pushes Back Fed Rate-Cut Call After Strong September Jobs Data
Key Takeaways
A resilient U.S. labor market has prompted Morgan Stanley to abandon its call for a December interest-rate cut by the Federal Reserve, shifting the timeline for policy easing into next year.
The delayed September employment report showed U.S. nonfarm payrolls rising by 119,000, reversing August’s slight decline and more than doubling expectations for a modest 50,000 gain. While the unemployment rate ticked up to 4.4%—the highest in four years—Morgan Stanley highlighted the broad-based nature of the hiring rebound, arguing that the summer’s slowdown in job growth was likely overstated.
Strategists at the bank view the data as evidence of labor-market stabilization rather than renewed weakness, reducing the urgency for immediate monetary policy easing. The jobs report, originally scheduled for early October, was pushed back due to a 43-day U.S. government shutdown.
With the stronger print in hand, Morgan Stanley now anticipates the first Federal Reserve rate cut in January, followed by additional reductions in April and June 2026. Under this updated path, the federal funds rate would trend toward a 3.00%–3.25% range over the following year, marking a measured normalization in interest rates.
Key Points – Morgan Stanley withdraws its call for a December Fed rate cut. – September nonfarm payrolls rose by 119,000, beating the 50,000 consensus and reversing August’s decline. – Unemployment rose to 4.4%, a four-year high, but hiring breadth suggests labor-market stabilization. – The September jobs report was delayed by a 43-day U.S. government shutdown. – New forecast: first rate cut in January, with additional moves in April and June 2026. – Fed funds rate seen easing toward 3.00%–3.25% over the subsequent year.
