Morgan Stanley: The Federal Reserve's rate hike magnitude may be lower than market expectations
On September 29, Morgan Stanley interest rate strategists stated in a report that after the Federal Reserve's rate hike in September, it is expected to raise rates once more in December and again in March of next year. Market pricing currently indicates a more aggressive rate hike over the next 12 months. The strategists noted that uncertainties surrounding the Federal Reserve, economic growth, corporate bond issuance, and oil price trends are driving up expectations for further monetary tightening over the next 12 months. Morgan Stanley believes the actual degree of tightening by the Federal Reserve will not reach the level anticipated by the market, as key factors influencing the Fed's policy path will only become clearer later this year. According to data from the London Stock Exchange Group (LSEG), money markets currently expect cumulative rate hikes of 100 basis points by the Federal Reserve over the next 12 months.
Morgan Stanley's view suggests the Fed's actual rate-hike path will be shallower than the ~100bp currently priced by money markets, meaning tighter monetary policy expectations may ease. If markets reprice this, upward pressure on yields would fade and liquidity conditions would improve, supporting risk assets including crypto. This is a forecast, not confirmed policy, so BTC and high-beta altcoins are short-term bullish (medium).