Following unexpectedly strong U.S. payroll data, Morgan Stanley removed its call for a rate cut in December. Despite recent worries, September's job growth showed that the economy is still strong.
After a downwardly revised 4,000 job decrease in August, non farm payrolls increased by 119,000 jobs. The 50,000 additions that economists had predicted were significantly less than this. The recovery, according to analysts, suggests the summer downturn was exaggerated.
At 4.4%, the unemployment rate reached its highest point since 2020. Morgan Stanley pointed out that the underlying payroll strength indicates stabilisation rather than decline notwithstanding the increase.
The 43 day U.S. government shutdown caused the September jobs data, which was supposed to be released on October 3, to be postponed, raising market expectations in recent weeks.
Morgan Stanley now projects that the policy rate will drop to 3%-3.25% in January, April, and June of 2026. Despite a minor softening of odds following the announcement, traders continued to wager on no December decrease.
