Summary of Morgan Stanley Global Macro Forum Call Industry and Company Focus - The call primarily focuses on the macroeconomic outlook and Federal Reserve policy, with insights from Morgan Stanley's Chief Fixed Income Strategist, Chief US Economist, Chief Global Economist, and Global Head of Macro Strategy. Core Points and Arguments 1. **Expected Rate Cuts**: Morgan Stanley anticipates a 25 basis point cut in the Federal Funds rate at the December meeting, with further cuts expected in January and April, targeting a terminal range of 3.0-3.25% [6][43][30]. 2. **Economic Projections**: - Real GDP growth is projected at 1.7% for 2025, slightly up from 1.6% in September [10]. - The unemployment rate is expected to remain stable at 4.5% for 2025 [10]. - Headline PCE inflation is forecasted to decrease to 2.9% in 2025, down from 3.0% [10]. 3. **Market-Implied Trough Policy Rate**: The market pricing of Fed policy is expected to move below the September 2024 low, with current pricing approximately 25 basis points above the economists' probability-weighted path [13][43]. 4. **Term Premium**: The term premium has returned to the lower end of its post-April 2 range and is expected to remain range-bound as the USMCA renegotiation approaches [43][26]. 5. **USD Bear Regime**: The initial phase of a USD bear regime is expected to continue, characterized by falling real rates, ongoing Fed cuts, widening breakevens, and a buoyant risk appetite [43]. 6. **Long-Term Outlook**: As 2026 progresses, a rebound in long-end US rates is anticipated, leading to a shift towards a carry regime, although a return to the high risk premiums seen in Q2 2025 is not expected [43]. Other Important Insights - **Labor Market Conditions**: The US labor market is showing signs of softness, which is likely to facilitate front-loaded rate cuts by the Fed [30]. - **EUR/USD Forecast**: The EUR/USD exchange rate is projected to rise to 1.23 in the coming months, driven by US-EU rate compression and an increase in USD-negative risk premium [36][37]. - **Risk Premium Dynamics**: The USD risk premium has stabilized but may widen again, indicating potential volatility in currency markets [33][35]. This summary encapsulates the key insights from the Morgan Stanley Global Macro Forum, focusing on the anticipated monetary policy changes, economic forecasts, and market dynamics.