Morgan Stanley expects no changes at the May FOMC meeting on Wednesday, while forecasting the Bank of England to cut by 25bps on Thursday, with signs of further easing to come despite internal dissent.
Key Points:
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FOMC (Wed):
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No rate change expected.
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Balance sheet policy also likely to remain unchanged.
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Focus will be on forward guidance and the Fed’s data-dependent posture amid policy uncertainty.
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BoE (Thurs):
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Expected to cut Bank Rate by 25bps.
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Anticipate at least two dissenters favoring a 50bp cut, reflecting more dovish internal sentiment.
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Guidance language expected to shift, with removal of the word “gradual”, signaling a readiness for back-to-back cuts.
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Morgan Stanley projects Bank Rate to reach 3.25% by end-2025, down from the current 4.50%.
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Conclusion:
The Fed is likely to stay on the sidelines in May, awaiting clearer macro signals, while the BoE is poised to lead major G10 central banks into an easing cycle, possibly with increasing pace in response to rising economic and policy headwinds.
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This article was written by Adam Button at www.forexlive.com.