Source: Zhitong Finance
Author: Zhao Jinbin
The CEO of Swiss banking giant UBS Group said on Thursday that the fight against inflation is not over yet, and some investors seem to be expecting too much that the Federal Reserve may cut interest rates sharply this month.
UBS CEO Sergio Ermotti said in an interview, “I think the market seems to be expecting such aggressive action from the Federal Reserve.”
The question of whether the Federal Reserve will cut interest rates at the end of the next policy meeting on September 18 has already been answered to a large extent. The only question left is: how much to cut interest rates.
Ermotti added that the “most important” issue for the Federal Reserve to consider is still inflation, which is still difficult and is not “fully controlled.”
According to data released on Wednesday, the US core consumer price index (excluding fluctuating food and energy prices) rose 0.3% in August, slightly higher than the 0.2% increase forecast.
Although the broader CPI (a broad measure of the cost of goods and services in the US economy) rose by only 0.2% in August, the rise in core CPI may weaken the possibility that the Federal Reserve will cut interest rates sharply at next week's policymakers meeting.
Ermotti said, “I think there may be a reduction, but it won't be as expected by the market.”
According to CME's FedWatch tool, although traders expect an 87% chance of cutting interest rates by 25 basis points in September, 13% still expect to cut interest rates by 50 basis points. Currently, the Federal Reserve's benchmark lending rate is 5.25%-5.50%.
Additionally, Ermotti said that the long-awaited soft landing is still likely to happen, adding that other economic data still seem to point to this situation.
“Part of inflation is very sticky, but consumer performance is quite good,” he said. “But I would like to say that as of now, the outlook is very consistent with a soft landing, so we are still optimistic about the situation.”
Ermotti also shared his optimism about Asia, saying that while UBS sees the region's growth momentum as “excellent,” the region is not immune to the challenges posed by geopolitics and the broader global economic outlook.
Regarding the Chinese market, Ermotti said it will redouble its efforts to fulfill the bank's promises and opportunities in China. “We have been in China for over 50 years, and we will stay there for 100 or 200 years,” he said.
Last month, UBS reported second-quarter profit exceeding expectations, achieving net profit attributable to shareholders of $1.136 billion, thanks to cost-cutting measures and increased revenue from the global wealth management and investment banking sector.
“Overall, our two real engines of opportunity and growth remain America and Asia, with China being the main driver,” Ermotti said.
Editor/Jeffy