Sergio Ermotti, CEO of UBS Group AG, Tuesday, May 7, 2024.
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The chief executive of Swiss banking giant UBS said on Thursday that the fight against inflation is not over yet and that some investors’ expectations that the Federal Reserve could cut interest rates sharply this month appear to be overdone.
“I think the market seems to be a little too ahead of its time in expecting such aggressive action from the Fed,” UBS Group AG Chief Executive Sergio Ermotti told CNBC’s “Squawk Box Asia.”
this The question of whether the Fed will cut interest rates By the end of the next policy meeting on September 18, the question will have been largely answered. The only question that remains is: how much.
Ermotti added that the “most important” issue for the Fed to consider remains inflation, which remains troublesome and is not yet “fully under control.”
Data released on Wednesday showed that U.S. core consumer prices, which exclude volatile food and energy prices, rose 0.3% for the month August’s growth rate was slightly above expectations of 0.2%.
While broader CPI, a broad measure of the cost of goods and services in the U.S. economy, rose 0.2% in August, the rise in core CPI could undermine the likelihood of a sharp rate cut by the Federal Reserve when policymakers meet next week.
“I would say there may be cuts, but not as much as the market expects,” Ermotti said.
While traders see about an 85% chance of a 25 basis point rate cut in September, 15% still expect a 50 basis point cut. CME Group’s FedWatch Tool. One basis point is 0.01 percentage point.
The Fed’s benchmark borrowing rate, currently between 5.25% and 5.50%, affects most other interest rates consumers pay.
Ermotti said a long-awaited soft landing was still achievable, adding that other economic data still seemed to indicate that was the case.
“Some of the inflation is very sticky, but consumers are affording it quite well,” he said. “But I would say at the moment, the outlook is pretty consistent with a soft landing, so we remain positive on the situation.”
Ermotti also expressed his optimism about Asia, saying that while UBS sees growth momentum in the region as “very good”, the region is not immune to the challenges posed by geopolitics and the broader global economic outlook. challenge.
Despite China’s bleak economic outlook, Ermotti increased the World Bank’s commitment to China and the opportunities it offers. “We have existed in China for more than 50 years, and we will continue to exist in the next 100 or 200 years,” he said.
last month, UBS Report says second-quarter profit expectations fell short US$1.136 billion Net profit attributable to shareholders increased significantly due to cost-cutting measures and higher revenues in the global wealth management and investment banking divisions. The company compiled a consensus forecast of $528 million.
“Broadly speaking, our two real opportunities and growth engines remain the United States and Asia, with China being the main driver of that,” Ermotti said.
