Morgan Stanley Sees a Darker Outlook

Analysts expect a weaker recovery and bigger Fed interest rate cuts.


A gloomy report from Morgan Stanley this morning:

Analysts expect a weaker recovery from recession. They now forecast real growth of 0.7 percent in 2008 and 2.9 percent in 2009 on a fourth-quarter to fourth-quarter basis (down from 1.3 percent and 3.2 percent, respectively): "The culprits: a deepening credit crunch, the supply shock of higher energy and food prices, and growing consumer caution in the face of declining household wealth."

In addition, Morgan Stanley sees more money stimulus from the Fed: a cut of three quarters of a percentage point at the March 18 meeting. Previously, the financial services firm was expecting half a percentage point.