Morgan Stanley's rate cut expectations undergo a major adjustment: postponed from January to June and September, what signals does this send?

Morgan Stanley recently adjusted its expectations for a rate cut by the Federal Reserve, no longer anticipating cuts in January and April, but instead expecting a 25 basis point cut in June and September. Although this adjustment appears to be merely a delay in the schedule, it reflects a significant shift in the Fed’s policy outlook and offers new insights to the market.

Why the Rate Cut Expectations Are Delayed

From Tightening to Watchful Waiting

Morgan Stanley’s revised outlook indicates that the Fed is adopting a more cautious approach to rate cuts. The timing of the news release (January 10) was already close to the January rate decision. If a rate cut had truly been planned for January, this delay suggests that the actual situation may be more complex than previously thought.

According to the latest news, Morgan Stanley Chief Investment Officer Mike Wilson remains optimistic about the market outlook, believing that the Fed’s policy has stabilized, and that the Fed’s proactive restart of asset purchases has eliminated liquidity risks. This means that the urgent risks facing the market have been alleviated, and there is no need for the Fed to rush into rate cuts.

Comparison Table of Expectation Changes

This adjustment essentially pushes the original two rate cuts back by 4-5 months, with the overall magnitude unchanged but the pace slowing down.

Implications for the Market

Improved Liquidity Environment

The Fed’s restart of asset purchases has alleviated liquidity pressures in the market. Mike Wilson explicitly stated that this has removed a significant risk layer for investors. In other words, the market is no longer worried about liquidity, and the Fed does not need to cut rates quickly to release liquidity.

Opportunity Window for Risk Assets

Wilson mentioned in an interview that, although the long-term outlook remains positive, there could be a 10% market correction in the medium term. This statement is quite interesting—optimistic yet cautious. His advice is to view corrections as buying opportunities. For risk assets like cryptocurrencies, this means institutional investors are preparing for potential volatility, but the overall attitude remains bullish.

What Morgan Stanley’s Crypto Strategy Implies

Interestingly, while adjusting its rate cut expectations, Morgan Stanley is also advancing a series of cryptocurrency-related initiatives:

• Filed for spot ETFs for Bitcoin, Ethereum, and Solana with the SEC
• Plans to launch a digital wallet supporting tokenized assets by 2026
• Participating in settlement channel tests on blockchains like Solana

These moves are not accidental. An institution that is optimistic about the long-term market prospects and believes liquidity risks have been eliminated will naturally increase exposure to risk assets. Morgan Stanley’s actions are a statement: they believe in the future of the crypto market.

Summary

Morgan Stanley’s adjustment of rate cut expectations reflects the Fed’s shift from risk response mode back to normal management. The elimination of liquidity risks and policy stabilization mean the market no longer needs emergency measures but is entering a relatively stable environment.

This provides a clear signal to the crypto market: institutional investors are shifting from defense to offense. The intensive crypto-related deployments by top global investment banks like Morgan Stanley indicate they believe this market has matured enough for long-term investment. The delay in rate cuts is not bad news but a sign of improving market fundamentals—no urgent stimulus is needed anymore.