Federal Rate Cuts Predicted by Morgan Stanley

Morgan Stanley has revised its outlook, now predicting 25 basis point Fed rate cuts in September and December 2025. These expectations arise from evolving signals from Fed Chair Jerome Powell and political pressures under President Donald Trump’s administration. According to James Gorman, CEO of Morgan Stanley, “Our revised outlook reflects evolving signals from Fed Chair Jerome Powell and the political landscape in Washington.”

Key figures involved include Morgan Stanley, Jerome Powell, and Donald Trump, who has criticized Powell and is pushing for larger rate cuts. Morgan Stanley’s assessment suggests significant focus shift from inflation to labor market risks. For more details on federal monetary policy decisions, visit the Federal Reserve FOMC.

Anticipated rate reductions could lead to increased institutional and retail inflows into cryptocurrencies, particularly into Bitcoin, Ethereum, and major DeFi protocols as investors seek alternatives to lower traditional yields. These adjustments might foster greater capital allocation to risk assets.

Market implications mainly concern digital assets and DeFi TVL, with historical precedence indicating a positive shake-up. Previous similar scenarios saw uplifts in both digital asset prices and liquidity flows, fostering an environment conducive to bullish momentum.

While the immediate market response remains muted, the forecasts imply notable future impacts on global financial flows. Analysts remain watchful of real-time reactions from key industry leaders, as investment dynamics may soon reflect these shifts.

Historically, dovish Fed policies have catalyzed positive shifts in crypto markets, bolstering DeFi governance tokens like AAVE, MKR, COMP, and more. Layer 1 assets such as ETH and SOL may see increased utility and transaction flow.