Monat: Juni 2025

• First cut likely delayed until March 2026.
• Tariff-induced inflation cited as key reason for delay.
• Crypto markets may benefit from lower rates.

Morgan Stanley has issued a major forecast that could reshape market expectations across asset classes. The investment bank now predicts that the US Federal Reserve will reduce interest rates seven times by the end of 2026.

This would bring the federal funds rate down to a target range of 2.5% to 2.75%.

The shift, though delayed, is seen as a possible catalyst for high-risk assets like Bitcoin and other digital currencies, especially as crypto markets typically thrive in low-interest environments.

The first rate cut, however, isn’t expected until March 2026—much later than earlier projections.

Rate cuts delayed, but deeper than before

The revised prediction marks a significant change in Morgan Stanley’s outlook.

Economists at the bank had initially expected rate reductions to begin in mid-2025. However, recent inflation risks—specifically from new US tariffs—have prompted a rethink.

Michael Gapen, Morgan Stanley’s chief economist for the US, attributed the delay to inflationary pressure expected to arise over the next three to six months.

The tariffs are seen as adding to consumer prices, which could prevent the Federal Reserve from cutting rates too early.

Morgan Stanley now expects the central bank to stay on hold until March 2026.

Once rate cuts do begin, they are projected to come rapidly, with the federal funds rate being reduced by a cumulative 275 basis points across 2026 and into 2027.

Impact on crypto and high-risk assets

Periods of falling interest rates tend to favour risk assets. When borrowing costs go down, liquidity improves and investors typically shift capital out of low-yield instruments into higher-return opportunities.

In past cycles, this has benefited emerging markets, technology stocks, and especially cryptocurrencies.

Bitcoin, which was born during the last major low-rate cycle following the 2008 financial crisis, has historically seen accelerated growth during periods of monetary easing.

With the anticipated shift in Fed policy, analysts expect investor interest in digital assets to grow—particularly as regulated Bitcoin ETFs continue to gain traction among institutional investors.

Morgan Stanley’s projection, if realised, could mark a turning point for crypto.

While not an official signal from the Fed, the market tends to price in such expectations ahead of time, often triggering momentum shifts well before the central bank takes action.

Bitcoin’s performance under scrutiny

As of the time of writing, Bitcoin is trading at $107,295 with a market capitalisation of $2.13 trillion. It has gained 1.75% in the last 24 hours.

Although price movement has remained relatively stable in recent weeks, broader sentiment is beginning to turn more optimistic.

The current macro environment has led to cautious optimism among crypto investors.

The prospect of lower rates over the next two years, coupled with the institutional tailwind from ETFs, is creating conditions some analysts believe could support the next major rally.

Market outlook shifts despite Fed silence

While the Federal Reserve has not officially responded to Morgan Stanley’s forecast, the report has already triggered widespread discussion across financial markets.

Portfolio managers and institutional investors are now weighing how a potential rate-cut cycle could reshape asset allocation, particularly into crypto and other high-volatility sectors.

If the Fed follows through with the predicted cuts, capital could begin flowing more freely into alternative investments.

This would likely benefit not only Bitcoin and Ethereum but also newer coins and DeFi platforms that often attract attention during periods of monetary expansion.

Until then, markets remain in a holding pattern. But the groundwork may already be in place for a significant shift once the Fed moves from talk to action.

The post Fed could slash rates to 2.5% by 2026; crypto markets brace for impact appeared first on CoinJournal.