UBS says that a rate cut by the Fed is expected and has been for a long time, given the ongoing decline in inflationary pressures in the United States and the slowdown in the labor market.
But the most important question is, how many points will the Fed cut interest?
25 points or 50 basis points.
Our forecast is that a reduction of 25 basis points will be only a point, and a reduction of more than 25 basis points seems unlikely.
A 50 basis point rate cut would be seen as a panic, even though the Fed is behind the curve in cutting rates, and the markets are now putting a 67% probability of a 50 basis point rate cut.
UBS concludes that we are likely to see smaller and more frequent rate cuts rather than larger ones to start the cycle.
