Ignore hawkish FOMC minutes, Fed will cut rates in 2024: UBS

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UBS analysts remain confident that the Federal Reserve will cut rates in 2024 despite the hawkish tone in the latest FOMC minutes. The minutes revealed that several Fed officials were open to further rate hikes if inflation risks persisted, which was more hawkish than Fed Chair Jerome Powell's remarks. UBS notes that recent economic data, including stronger-than-expected labor market figures and US Treasury yield increases, have fueled concerns that the Fed might keep rates high for longer. However, UBS believes that the Fed's patient, data-dependent approach and the slowdown in inflation indicated by the April Consumer Price Index release will lead to rate cuts in 2024. UBS projects cumulative rate cuts of 50 basis points by year-end and expects a resumption of disinflation and a decelerating US economy. Despite the recent hawkish rhetoric, UBS believes the Fed is still likely to cut rates.