Fed and European Central Bank could cut interest rates in September, Morgan Stanley strategist says

The U.S. Federal Reserve and European Central Bank could move to cut interest rates in September as key data provides further signs that inflation is cooling in the U.S. and the euro zone, a Morgan Stanley strategist said Friday.

Andrew Sheets, managing director and head of cross-asset strategy, told CNBC that the bank had grown bullish about the prospect of dual cuts, amid recent consumer price index (CPI) and labor market data in the U.S. and Europe.

“We’re more optimistic that both the Fed and ECB will cut rates in September,” he told “Squawk Box Europe.”

The two central banks showed signs of monetary policy divergence earlier this month, as the ECB implemented its first interest rate cut in almost five years, while the Fed insisted that U.S. inflation remains too high to take a similar step.

“It’s understandable that these central banks don’t want to pre-commit. They don’t want to sound overly complacent about the risks of inflation,” Sheets said.

Source: CNBC