Woofun AI reports that Morgan Stanley maintains its baseline forecast of unchanged interest rates but warns that a drop in the unemployment rate below 4% or sustained high inflation could force a shift toward rate hikes. Analyst Michael Gapen noted that recent data, including falling oil prices following the US-Iran memorandum, has provided some reassurance regarding the no-hike scenario.

The bank projects Q4 overall and core PCE inflation at 3.2% and 3.0%, respectively, below FOMC median expectations, with summer job growth estimated at 50,000 to 60,000.

However, Gapen cautioned that an unemployment rate under 4.0% signals overheating risks, while monthly core inflation above 0.3% or renewed Middle East tensions would also trigger a reassessment. Brent crude currently trades near $72.6 as markets await upcoming employment and inflation data.