Financial Giants Clash on Fed Rate Cuts and Stock Market Outlook

UBS Investment Bank strategists predict that the Federal Reserve will cut interest rates by 275 basis points next year, significantly more than what markets are currently pricing. They expect a decline in inflation to prompt the central bank to start easing policy as early as March, with rates likely to be cut in large increments. The strategists anticipate the benchmark federal funds rate to fall to between 2.5% and 2.75% by the end of 2024, with a terminal rate of 1.25% by early 2025. They believe the US economy will enter a recession by the second quarter, in contrast to money markets' expectation of only a 75 basis point cut starting in July.