UBS analysts suggest that the Federal Reserve is likely to maintain its cautious stance, holding off on further rate cuts until core inflation eases further. The bank predicts that core inflation will slow to below 2.5% by the time of the Federal Open Market Committee (FOMC) meeting in June, which could give the Fed confidence to resume easing policy money
UBS has revised its forecast for rate cuts in 2025, now expecting two 25-point cuts:
- one in June
- and another in September
for a total of 50 basis points. This marks a revision to the bank's previous forecast of one cut per quarter, totaling 100 basis points for the year.
The Fed's approach remains data-driven, UBS notes. Weaker-than-expected labor market data or inflation could trigger an earlier rate cut in March, although this would depend on how economic conditions improve in the coming months.
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