Strategists expect the US key interest rate to fall to between 2.50% and 2.75% by the end of 2024, anticipating it to reach 1.25% in early 2025.
UBS strategists expect the Federal Reserve to cut interest rates by 275 basis points by the end of 2024, far exceeding market expectations.
Inflation will return to normal levels quickly, and the Fed will likely view real interest rates as too high by March, bank analyst Banu Baweja said in an interview published Monday with Bloomberg.
His colleague Arend Kaptein said: “We expect interest rates to see a natural reduction, as every central bank - except Japan - will ease monetary policy more than markets expect.”
Strategists expect the US key interest rate to fall to between 2.50% and 2.75% by the end of 2024, anticipating it to reach 1.25% in early 2025.
The analysts point out that the current range is between 5.25% and 5.50%, but it compares to the past where the range was much larger. The two analysts attribute this change to their expectations that the US economy will deteriorate and slide into recession in the second quarter of next year.
On the other hand, financial market expectations show the Fed cutting interest rates by just 75 basis points next year, starting in July.
