The Federal Reserve building in Washington, U.S., Jan 26, 2022. REUTERS/Joshua Roberts/File photo
UBS Global Wealth Management said it now expects the U.S. Federal Reserve to start lowering interest rates in June, compared to its prior view of cuts beginning in May.
The economy has been “resilient” in the face of tighter monetary policy, which has led the brokerage to push back its earlier forecast of a 25 basis points cut in May to June.
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“Given the upside surprises to both payrolls and inflation, we now expect the Fed to wait a bit longer before cutting rates,” UBS economists said in a note dated Feb. 20.
U.S. consumer prices rose more than expected in January amid a surge in the cost of rental housing, recent data showed, while job growth accelerated and wages increased by the most in nearly two years.
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UBS also expects the Fed to deliver 75 bps of cuts in 2024, less than its previous estimate of 100 bps. It maintained that the Fed will deliver one rate cut per quarter after the first one in June.
A slim majority of economists surveyed by Reuters said the Fed will cut the federal funds rate in June, adding that greater risk was the first rate cut in the cycle would come later than forecast.