Morgan Stanley strategist predicts that the Federal Reserve and the European Central Bank may reduce interest rates in September.

• In September, the U.S. Federal Reserve and European Central Bank may reduce interest rates due to indications that inflation is decreasing in both the U.S. and the euro zone, according to a Morgan Stanley strategist.
• The bank's managing director and head of cross-asset strategy, Andrew Sheets, stated to CNBC that the bank had become more optimistic about the possibility of dual cuts in response to recent CPI and labor market data in the U.S. and Europe.
• "We believe that the ECB will observe inflation continuing to moderate by September, while the Fed sees inflation falling," he stated.

In September, the U.S. Federal Reserve and European Central Bank may reduce interest rates due to indications that inflation is decreasing in both the U.S. and the euro zone, according to a Morgan Stanley strategist.

Andrew Sheets, managing director and head of cross-asset strategy, stated to CNBC that the bank had become optimistic about the possibility of dual cuts, based on recent consumer price index (CPI) and labor market data in the U.S. and Europe.

"He stated on "Squawk Box Europe" that he is more hopeful that both the Fed and ECB will reduce interest rates in September."

Earlier this month, the two central banks displayed indications of monetary policy divergence, with the ECB announcing its first interest rate reduction in nearly five years, while the Fed maintained that U.S. inflation is still too high to consider a similar move.

Sheets explained that central banks are hesitant to make a pre-commitment because they want to avoid appearing overly confident about the risks of inflation.

"We believe that the ECB will observe inflation continuing to moderate by September, while the Fed sees inflation falling," he stated.

In May, the Euro zone inflation rose by 0.2 percentage points on a month-on-month basis, reaching 2.6%. Despite anticipations of fluctuations due to base effects from the energy market and the withdrawal of government support across the region, the increase was unexpected.

The latest CPI showed that U.S. inflation held steady in May but was up 3.3% from a year ago, which was an improvement on the 0.1% monthly gain economists had expected.

The Fed's preferred inflation gauge, the core personal consumption expenditures price index (PCE), will be closely monitored by markets on Friday morning.

Analysts anticipate that the headline PCE will remain unchanged from April and increase by 2.6% year-on-year. Core PCE is predicted to rise by 0.1% month-on-month, which aligns with Sheets' forecast.

This September, the Fed is predicted by a majority of economists polled by Reuters to reduce interest rates from the current range of 5.25% to 5.50%. Additionally, the ECB is expected to cut rates in September and December.