Morgan Stanley projects the U.S. Federal Reserve will implement seven interest rate cuts in 2026, beginning in March, which would reduce the terminal federal funds rate to a range between 2.5% and 2.75%. This forecast represents a notable expectation for a prolonged easing cycle. Meanwhile, Goldman Sachs has revised its outlook for Fed rate cuts in 2025, now anticipating that the Federal Reserve will begin reducing rates as early as September, advancing from a previous forecast of December. Goldman Sachs expects three 25-basis-point cuts in 2025, totaling 75 basis points, with an additional 50 basis points in cuts projected for 2026. The firm cites softer tariff impacts and ongoing disinflation as key reasons for the earlier easing. Goldman Sachs also lowered its terminal rate forecast to between 3.00% and 3.25%, down from an earlier estimate of 3.50% to 3.75%. In response to these monetary policy outlooks, Goldman Sachs has raised its S&P 500 index return forecasts, projecting gains of 3% over three months (targeting 6,400), 6% by year-end (6,600), and 11% over 12 months (6,900). Bank of America has also increased its year-end S&P 500 target to 6,300 from 5,600, citing the resilience of Corporate America. Market odds currently indicate a low probability of a July rate cut, with a 5% chance, while the likelihood of a September cut is estimated at around 50% to 54%.