UBS Group CEO Sergio Ermotti (Sergio Ermotti) 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.

In an interview, the UBS Group CEO said, “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 basically been answered. The only question left is: how much to drop.

Ermotti added that the “most important” issue for the Federal Reserve to consider is still inflation, which is still very difficult and is not “fully controlled.”

According to data released on Wednesday, the US core CPI, which excludes volatile food and energy prices, rose 0.3% month-on-month in August, slightly higher than the 0.2% forecast.

Although the broad CPI, which measures the cost of goods and services in the US economy, increased 0.2% month-on-month in August, the increase in core CPI may reduce the possibility that the Federal Reserve will cut interest rates sharply at next week's policymakers meeting.

“I think interest rates may be cut, but not as expected by the market,” Ermotti said.

According to the Chicago Mercantile Exchange Group's US Federal Reserve observation tool, traders expect the probability of cutting interest rates by 25 basis points in September to be about 85%, but 15% still expect to cut interest rates by 50 basis points.

The Federal Reserve's benchmark borrowing rate is currently between 5.25% and 5.50%, which affects most other interest rates paid by consumers.

Ermotti said the long-awaited soft landing is still likely to happen, adding that other economic data still seem to point to this situation.

“Some inflation is very sticky, but consumer performance is quite good,” he said. But I would like to say that for now, the outlook is quite consistent with a soft landing, so we are still optimistic about the situation.”

Ermotti also shared his optimism about Asia, saying UBS sees “very good” growth in the region. He said, “We have invested in China for more than 50 years, and we will stay there for 100 or 200 years.” Although Asia is not immune to the challenges posed by geopolitics and the broader global economic outlook.

“Overall, our two real engines of opportunity and growth are still America and Asia, and China is the main driver,” Elmorti said.

edit/lambor