UBS Global Wealth Management announced Thursday it has revised its forecast for the U.S. Federal Reserve’s first interest rate cut, pushing the expected start date from June to September. The firm attributed the change to recent economic data showing persistent inflation and a resilient labor market.
In a note to clients, the wealth management division of UBS stated it now anticipates the central bank will implement two 25-basis-point cuts in 2024. This marks a shift from its previous forecast, which had anticipated an earlier start to monetary policy easing.
The adjustment follows the release of the U.S. Consumer Price Index (CPI) report for March. According to the Bureau of Labor Statistics, the CPI for all urban consumers rose 3.5% over the last 12 months before seasonal adjustment, a figure that was higher than many economists had projected.
UBS also pointed to the continued strength of the U.S. labor market as a key factor in its updated forecast. The most recent employment report from the Bureau of Labor Statistics showed the economy added 303,000 jobs in March, exceeding expectations and indicating robust economic activity.
The move by UBS aligns it with several other major financial institutions that have recently altered their rate cut projections. Following the March inflation report, Goldman Sachs adjusted its forecast for the first rate cut from June to July. Bank of America now projects the first reduction will occur in December.
Federal Reserve officials have maintained a consistent public stance, emphasizing a data-dependent approach to monetary policy. In recent statements, Fed Chair Jerome Powell and other policymakers have noted the need for greater confidence that inflation is on a sustainable path toward the central bank’s 2% target before they would consider lowering the federal funds rate.
The Federal Open Market Committee has held its benchmark interest rate in a target range of 5.25% to 5.50% since July 2023. The committee’s next scheduled policy meeting is set for April 30-May 1.
