Global financial giant UBS has released a remarkable assessment of US monetary policy. The bank said it maintains its expectation that the Fed will cut rates before the end of the year.
A research note published by UBS emphasized that the Federal Reserve will continue its policy of monetary easing under the current outlook. The report highlighted that Federal Reserve Chairman Jerome Powell recently suggested that the need for tightening is limited despite rising energy prices. The committee recalled Chairman Powell’s remarks that supply shocks, particularly shocks such as increases in oil prices, are generally ignored as long as inflation expectations are kept in check.
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Analysts at UBS said the Fed was looking for further evidence of a sustained decline in core inflation before returning to easy monetary policy, but still expected a total rate cut of 50 basis points by the end of the year.
Meanwhile, the report also included the outlook for the U.S. bond market. UBS said U.S. Treasury yields are now significantly higher than they were before the geopolitical tensions, so there is room for yields to fall. The bank said it expects the two-year Treasury yield to be 3.25% and the 10-year Treasury yield to be 3.75% at the end of the year.
*This is not investment advice.
