Boston Fed Study Finds U.S. Jobs Resilient to Oil Prices; Morgan Stanley Sees Rate Cuts Starting in 2027

Research from the Federal Reserve Bank of Boston found that changes in the structure of U.S. industry and energy use have reduced the impact of rising oil prices on hiring and overall employment. That lowers the risk of the traditional stagflation scenario in which high oil prices drive up inflation while undermining employment. Price pressures could nevertheless persist for longer, complicating the Federal Reserve’s policy trade-offs.

Morgan Stanley’s latest forecast calls for the Fed to keep its policy rate unchanged throughout 2026 and begin cutting rates only in March 2027. Together with the Boston Fed’s research, the forecast is shifting the market’s focus away from whether oil prices will trigger a jobs recession and toward how energy costs could prolong inflation and how a longer period of high interest rates could cumulatively affect the economy.