Morgan Stanley Sees Two US Rate Hikes, ECB Tightening This Year

Morgan Stanley has taken on a more hawkish stance regarding interest rates, predicting two U.S. Federal Reserve rate hikes and an additional European Central Bank increase later this year.

The forecasts come ahead of policy decisions from the Fed and the Bank of Japan this week, following the ECB's resumption of its tightening cycle.

Morgan Stanley expects the Fed to raise interest rates by 25 basis points at its September 15-16 meeting and deliver another quarter-point increase in December, as inflationary pressures persist.

The brokerage noted that the disinflation process has been 'slower and less convincing' than policymakers are likely to require, prompting it to forecast two rate hikes this year.