UBS has published its updated forecasts for the Federal Open Market Committee (FOMC):
- Given the upside surprises to both payrolls and inflation, we now expect the Fed to wait a bit longer before cutting rates, making its first 25 basis point cut in June rather than in May
- Our base case calls for one rate cut per quarter after that until the Fed Funds target range reaches 3.25~3.5%, in line with our estimate of the longer-run neutral rate
- we believe that a wide range of outcomes is possible
UBS analysts say that the Fed is in no rush to begin lowering interest rates, citing:
- the US economy's surprising resilience
- particularly the economy's growth rates have exceeded the Fed long-term trend estimate of 1.8% since Q3 2022
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