Dowling Securities will delay the expected rate cut by the Federal Reserve from March to June, expecting three rate cuts this year.

After the strong US employment data released on Wednesday, economists at Morgan Stanley have revised their prediction for the next Fed rate cut from March to June. Morgan Stanley still expects the Fed to cut rates by a total of 75 basis points this year, to a terminal rate of 3%, with cuts of 25 basis points each in June, September, and December. The team, led by Chief US Macro Strategist Oscar Munoz, wrote in a report that the anticipated policy easing is not due to worsening economic conditions, but rather as a result of inflation gradually returning to target levels and monetary policy moving towards normalization. They also stated that improvements in employment prospects should allow the Fed to shift focus towards inflation targets and expected inflation progress for 2026. Morgan Stanley predicts that US Treasury yields will continue to decline this year, with the 10-year yield expected to fall to 3.75% by the end of the year; previously, they had forecasted a larger drop to 3.5%.