UBS Surprises with Sharp Federal’s Rate Cuts Expectation in 2024 by 275 bps

Arend Kapteyn and Bhanu Baweja, UBS Investment Bank’s strategists, predicted a 275 basis points interest rate cut by the Fed in 2024, which is much more than the market expectation of 75 basis points.

The two believed the continuous decline of inflation would enable the central bank to halve the current over 5% rate, as the rate will fall to 2.5%-2.75% range by the end of 2024 and 1.25% as a terminal rate by early 2025.


A few days earlier, Morgan Stanley’s economist team predicted a 25 basis point rate cut on every FOMC meeting starting from June 2024. This will give the rate of 2.375% at the end of 2025, which is double UBS prediction.

Meanwhile, Goldman Sachs’ analysts predicted a rate cut starting from Q4 of 2024 by 25 basis points to a total of 175 basis points in the middle of 2026, which is around 3.5% to 3.75% or triple UBS prediction and lag by around six months.


In addition, the Fed prediction gave 3.9% as a terminal rate at the end of 2025, triple the UBS number at the same predicted period.