UBS Strategists Forecast Significant Rate Cuts by the Fed in 2024

UBS predicts that the Federal Reserve will shock markets by aggressively cutting interest rates in 2024 due to slow economic growth. They expect the Fed to reduce rates by 275 basis points by the end of the year, leading to a total effective federal funds rate of 2.50%-2.75%. UBS attributes this forecast to a significant slowdown in economic growth, reduced retail spending, a worsening consumer balance sheet, and a rise in the unemployment rate. They also anticipate continued disinflation, which will give the Fed confidence to pursue rate cuts. UBS believes that the lack of fiscal policy support from the government will further drive the Fed's decision to cut rates.