U.S. Fed’s rate hike cycle over? Morgan Stanley’s Chief Economist weighs in


  • Morgan Stanley’s Chief U.S. Economist, Ellen Zentner, believes the Federal Reserve has concluded its current cycle of interest rate hikes and predicts steady rates until potential cuts in 2024.
  • Zentner’s views add to the ongoing debate on U.S. monetary policy, especially in light of a potential Republican-led government shutdown that could impact the Fed’s decisions.

Ellen Zentner, Morgan Stanley’s Chief US Economist, recently made headlines by stating her belief that the Federal Reserve has concluded its current cycle of interest rate hikes. In a recent episode of the What Goes Up podcast, Zentner shared her insights on the Fed’s decision to maintain the benchmark federal interest rate. Moreover, she predicts that the Fed will keep rates steady until it is prepared to initiate rate cuts next year.

Zentner’s comments come at a time when inflation is showing signs of slowing down. Consequently, her views add another layer to the ongoing debate about the future trajectory of U.S. monetary policy. 

Additionally, she highlighted the potential impact of a Republican-led government shutdown, which could deprive policymakers of crucial economic data, thereby influencing their policy decisions. This situation, she suggests, could strengthen the Fed’s resolve to maintain the status quo in their upcoming November meeting.

A recent Reuters report confirmed the Federal Reserve’s recent decision to hold interest rates steady, adopting a more hawkish stance than previously expected. According to the report, the Fed projects a further rate increase by the end of the year and expects to maintain a tighter monetary policy through 2024.

Fed Chair Jerome Powell, however, cautioned that these projections are not set in stone and could change based on incoming economic data. This new information aligns with Zentner’s observations and adds weight to her prediction that the Fed will keep rates steady for the foreseeable future. Moreover, experts cited in the Reuters article agree that the U.S. economy is performing better than expected, thereby allowing the Fed to maintain this hawkish stance.

Conditions for future rate increases

According to Zentner, there are specific conditions that must be met for the Fed to consider future rate increases. One is a noticeable increase in slack in the labor market coupled with a slowdown in employment growth. The other condition involves a significant momentum shift in the essential services sector, deviating from its current trend.

Zentner also offered her predictions for interest rate cuts in 2024, which she expects to commence in March and continue at a pace of 25 basis points quarterly. While the Fed currently anticipates two rate cuts next year, Zentner suggests that there may be some disagreement on this outlook within the institution.

The political landscape could play a significant role in shaping the Fed’s monetary policy in the coming months.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

Share link:

Damilola Lawrence

Damilola is a crypto enthusiast, content writer, and journalist. When he is not writing, he spends most of his time reading and keeping tabs on exciting projects in the blockchain space. He also studies the ramifications of Web3 and blockchain development to have a stake in the future economy.

Most read

Loading Most Read articles...

Stay on top of crypto news, get daily updates in your inbox

Related News

Long Do CEO Anomaly Interview
Subscribe to CryptoPolitan