UBS: The Fed's first rate cut will be in September, and the market underestimates the extent of rate cuts in this cycle

ChainCatcher news, UBS economists reiterated their outlook for a soft landing for the U.S. economy on Monday. The bank expects the Federal Reserve to begin cutting interest rates in September and believes the market may be misjudging the extent of future rate cuts by the Fed.

UBS pointed out that although economic data has shown unusual volatility since the outbreak of the pandemic, certain trends now seem to have established themselves. The U.S. labor market, which was severely overheated two years ago, has returned to a state close to pre-pandemic levels, driven by strong growth in labor supply.

Additionally, retail sales and inflation are also showing signs of slowing down. In May, the core CPI, excluding food and energy prices, rose only 0.16% month-on-month, marking the smallest increase since August 2021. Although the core inflation rate is on a downward trend year-on-year, it remains well above pre-pandemic levels.