Morgan Stanley: "No US Recession"... Low Possibility of Big Rate Cut in September

"Fed, 75bp Rate Cut Expected Within This Year"
GDP Now Raises US Q3 Growth Forecast to 2.9%

U.S. investment bank (IB) Morgan Stanley recently analyzed the cause of the global stock market plunge, attributing it to concerns about the U.S. economy, and stated that "the U.S. economy is not experiencing a recession."

On the 6th (local time), Morgan Stanley stated in an investment note that it maintains its forecast that the U.S. Federal Reserve (Fed) will cut interest rates by 75bp (1bp = 0.01 percentage points) this year.

Morgan Stanley assessed that since the U.S. economy is not in a recession phase, there is no need for an emergency rate cut before the September Federal Open Market Committee (FOMC) meeting or a 'big cut' of 50bp at the September meeting.

Morgan Stanley analyzed, "The consumer growth rate is expected to slow from roughly 3% in the second half of last year to below 2% in the second half of this year," adding, "This slowdown is essential to ease demand and cool inflation."

Even on the day the New York stock market plunged, Morgan Stanley released an analysis suggesting that market concerns were exaggerated. The reason was that the six-month average increase in employment was 200,000, and there is a high possibility that the August employment figures will somewhat recover. They predicted that a big cut in September would only be possible if the August employment number falls below 100,000 and the unemployment rate rises above 4.3%.

Meanwhile, there is a forecast that the U.S. will continue solid growth in the third quarter.

According to the 'GDP Now' report released that day by the Federal Reserve Bank of Atlanta, the U.S. gross domestic product (GDP) growth rate for the third quarter is projected at an annualized rate of 2.9% quarter-over-quarter. The third-quarter growth estimate was initially 2.8% on the 26th of last month, then lowered to 2.5% on the 1st of this month, but was revised upward by 0.4 percentage points within five days. The U.S. GDP growth rates were 1.4% in the first quarter and 2.8% in the second quarter.