-- Morgan Stanley informed investors in a note Wednesday that it does not expect the Federal Reserve to begin cutting rates until September.

While the investment bank remains bullish on its call for three 25 basis point rate cuts this year, it is pushing out the start until September from the previous expectation of June.

"A reversal in key components points to disinflation ahead, but given the lack of progress in recent months, it will take a bit longer for the FOMC to gain confidence to take the first step," wrote analysts at the bank.

Morgan Stanley noted that it was early to warn of a reacceleration in inflation in the first quarter, but the data came in hotter than even they were anticipating.

Despite the data surprises, the firm's recently updated forecasts support the view that reacceleration in the first quarter was temporary and disinflation lies ahead.

"We see sequential rates broadly aligned with the Fed's 2% inflation target by the end of the year, bringing core PCE inflation to 2.7% 4Q/4Q in 2024," Morgan Stanley added.

The lack of progress since the start of the year suggests that it will take longer for the FOMC to gain confidence that inflation is on a sustainable path toward 2%.

Along with the three rate cuts this year, the bank expects four 25 basis point cuts through mid-2025.