Morgan Stanley expects the ECB to keep interest rates steady in 2026 vs the prior forecast of two 25 bps cuts each in June and September; Morgan Stanley expects the ECB to resume rate cuts in 2027 with two 25 bp cuts each in June and September

Morgan Stanley's update on the ECB's interest rate outlook signals a notable shift in expectations, now forecasting no cuts in 2026 compared to prior projections of two 25 basis point cuts. This change suggests a more cautious stance on the economic recovery, impacting the euro's strength and influencing fixed income strategies as markets reassess rate paths.