UBS CEO Ermotti: Inflation Fight Continues, Fed Rate Decision Awaited
UBS Group CEO Sergio Ermotti cautioned on Thursday that the battle against inflation is far from over and that some investors may be prematurely optimistic about significant rate cuts from the U.S. Federal Reserve this month. Speaking to CNBC’s "Squawk Box Asia," Ermotti remarked, "I think the market seems to be a little bit too ahead of the curve in expecting the Fed to go so aggressively."
With the Fed’s policy meeting set for September 18, uncertainty lingers over the size of the potential rate cut, though Ermotti anticipates a more measured reduction than market expectations. The Fed’s primary concern remains inflation, which still needs to be fully controlled, he noted. Recent data showed a 0.3% rise in the core U.S. consumer price index (CPI) for August, slightly above the 0.2% forecast. This uptick could limit the scope of the Fed’s rate cut.
While traders, using CME Group’s FedWatch Tool, estimate an 85% likelihood of a 25 basis point (bps) cut, a smaller 15% foresee a 50 bps reduction. The current Fed benchmark rate stands at 5.25%-5.50%. "I would say probably a cut, but not as the market expects," Ermotti commented.
Despite inflation concerns, Ermotti indicated that economic data suggest a potential soft landing. "Consumers are holding up pretty well," he said, maintaining a positive outlook on the situation.
Ermotti also expressed optimism about Asia’s growth momentum, despite geopolitical challenges and China’s sluggish economic outlook. Highlighting UBS’s long-term commitment to China, he stated, "We have been in China for more than 50 years, and we’re going to be there for the next hundred, 200 years."
In the second quarter, UBS outperformed profit expectations, reporting $1.136 billion in net profit attributable to shareholders, driven by cost-cutting measures and increased revenue from its wealth management and investment banking units. Ermotti emphasized that the U.S. and Asia, particularly China, remain key growth engines for the bank.
Original Story https://www.cnbc.com/2024/09/12/investors-expecting-an-aggressive-fed-cut-are-getting-too-ahead-of-the-curve-ubs-ceo-says.html
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