U.S. investment bank Morgan Stanley (MS) has lowered its 2025 economic growth forecast for America, citing uncertainty and impacts from import tariffs and the likelihood of higher inflation.
Consequently, the Wall Street firm lowered its growth forecast for this year to 1.5% from 1.9% previously. The investment bank also lowered its 2026 growth forecast to 1.2% from 1.3%. “Tariffs should translate into softer growth this year, whereas we previously assumed it would weigh on growth mainly in 2026,” wrote Morgan Stanley economist Michael Gapen in a report.
Morgan Stanley went on to say that U.S. President Donald Trump’s tariff policies are expected to drive up inflation and put pressure on the U.S. Federal Reserve as it looks to control price increases in the coming months. The bank reiterated its forecast of a single 25-basis-point interest rate cut by the American central bank this year, with that lone reduction likely to occur in June.
Goldman Sachs Weighs In
Morgan Stanley also took issue with market expectations for interest rate cuts this year, saying three rate reductions in 2025 is too optimistic. “We think markets will ultimately get these cuts, but much later than they expect,” wrote Gapen in his economic assessment.
Morgan Stanley is not alone in revising down its economic forecast for the U.S. economy. Investment bank Goldman Sachs (GS) also downgraded its 2025 economic growth forecast for America, while citing risks posed from import tariffs. Goldman Sachs lowered its U.S. growth forecast to 1.7%, from 2.2% previously, and also raised its 12-month recession probability to 20% from 15%.
Is MS Stock a Buy?
The stock of Morgan Stanley has a consensus Moderate Buy rating among 14 Wall Street analysts. That rating is based on five Buy and nine Hold recommendations issued in the last three months. The average MS price target of $145.27 implies 21.78% upside from current levels.
