Morgan Stanley cuts US growth forecast for 2025 on tariff concerns

NEW YORK, Mar 08 (Reuters): Morgan Stanley lowered its 2025 economic growth forecast for the United States on Friday, citing greater impact from tariffs and a still-tight labor market resulting in higher inflation.

"Earlier and broader tariffs should translate into softer growth this year, whereas we previously assumed it would weigh on growth mainly in 2026," said Morgan Stanley economists led by Michael T Gapen.

The Wall Street brokerage lowered its Q4/Q4 2025 growth forecast to 1.5 per cent from 1.9 per cent earlier. It also lowered its 2026 growth forecast to 1.2 per cent from 1.3 per cent.

President Trump's tariff policy is expected to drive up inflation and will increase pressure on the US central bank as it looks to control persistent inflationary pressures, the note said.

Morgan Stanley retained its forecast of a single 25-basis-point interest rate cut by the US Federal Reserve this year in June.