Morgan Stanley has revised its forecast for Federal Reserve interest rate policy, now anticipating two rate cuts of 25 basis points each in September and December 2025. This marks a shift from the bank's earlier projection of no rate cuts during 2025. The revised outlook follows signals from Fed Chair Jerome Powell indicating increased concern over labor market risks. Looking ahead to 2026, Morgan Stanley expects the Fed to implement quarterly rate cuts of 25 basis points in March, June, September, and December, which would bring the terminal federal funds rate target range to between 2.75% and 3.0%. The bank's updated forecast reflects a more accommodative monetary policy stance in response to evolving economic conditions.