UBS Economics-US Economic Perspectives _Fed US outlook update_ Pingle-109855115(1)

ab14August2024GlobalResearchandEvidenceLabUSEconomicPerspectivesFed&USoutlookupdateUpdatingourratecalltoreflectFOMCrisksreassessmentWeexpectthree25bpratecutsthisyear,oneateachoftheSeptember,NovemberandDecemberFOMCmeetings.WeexpectthistobewellsignaledintheSeptemberFOMCmeetingmaterialsandtheSummaryofEconomicProjections.WeexpectChairPowellwilllayoutacaseforanorderlywithdrawalofmonetarypolicyrestrictivenessinaspeechatJacksonHolethemorningofFriday,August23,andbyorderly,wemean25bpratecuts,ratherthan50bp.Atableofourrateprojectionbymeetingisbelow.WeviewwhatisunfoldingamidsttheCommitteeakintoareassessmentofshort-runr-star,orareassessmentoftheappropriatedegreeofrestrictiveness.ChairPowellhighlightedtheriskstothelabormarketinhistestimonytoCongresslastmonth,andraisedtheissueintheJulyFOMCmeetingpressconference,despitehiscontentionthelabormarketexpansionremainsstrong.HealsodidlittletopushbackagainstthemarketpricingsequentialratecutsatthetimeoftheJulyFOMCmeeting.OurforecasthasbeenthatweexpectedthegrowthslowdownunderwaytoshiftthenarrativeamongtheFOMC.Seeinggrowthactuallyslow,andthelabormarketslowonthebackofthat,wouldconvinceFOMCparticipantsthatmonetarypolicywasrestrictive.Theconcernsthatmonetarypolicywasnotthatrestrictive,andthesenseofanexpansionresilienttoratehikeswouldmeltaway.Ther-starishighernarrativewouldbereplacedwithF...