Morgan Stanley Sees 7 Fed Rate Cuts in 2026

• Morgan Stanley predicts seven rate cuts beginning March 2026.
• Terminal rate expected near 2.5–2.75%, easing monetary policy.
• Lower rates could fuel a rally in stocks and crypto.

Fed Rate Cuts Expected to Begin in March 2026

Morgan Stanley has issued a bold projection, anticipating seven interest rate cuts by the Federal Reserve in 2026. These cuts are expected to begin as early as March, gradually bringing the terminal rate down to around 2.5–2.75% by year-end. This would mark a significant shift from the tightening stance seen in recent years, signaling a more accommodative policy environment.

Factors Behind the Rate Cut Forecast

The investment bank cites several factors driving this outlook:

• Ongoing tariff-related inflation pressures, which may continue in the short term.
• A broader economic slowdown, with softer inflation giving the Fed room to ease.
• The need to restore neutral monetary conditions, targeting a 2.5–2.75% terminal rate.

These elements suggest that the Fed could begin a steady easing cycle, aiming to support economic stability and growth through lower borrowing costs.

Market Reaction and Investor Outlook

The expectation of multiple rate cuts has major implications for financial markets:

• Stock markets may benefit from improved investor sentiment and stronger corporate earnings, especially in sectors sensitive to interest rates.
• Cryptocurrencies often perform well in low-rate environments, as reduced yields on traditional assets push investors toward higher-risk options like Bitcoin and altcoins.
• A weaker US dollar and lower bond yields could follow, creating additional tailwinds for global and risk assets.

If this forecast materializes, 2026 could be a pivotal year for markets shifting toward a growth-friendly, low-rate environment.

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