Morgan Stanley economists cited "lack of progress" in inflationbattenkill34, postponed the forecast for the Fed's first interest rate cut from July to September. They still expect to cut interest rates by 25 basis points three times this year.

Economists such as Ellen Zentner, Sam Coffin and Diego Anzoategui said in the report that the lack of progress since the beginning of the year means it will take longer for Fed policymakers to be convinced that inflation is continuing to fall back towards the 2% target.

They predict that the three-month and six-month annualized core PCE will be "close to or below" 2% by the end of the year, so in this case, it will be "too late" to cut interest rates after September.