INSUBCONTINENT EXCLUSIVE:
Amid robust economic growth and persistent inflation in the United States, strategists at UBS Group AG spotlight a possible shift in Federal
Reserve policy.They argue that these conditions may drive the Fed to increase interest rates up to 6.5% by next year.Such a move would
sharply raise borrowing costs, deviating from earlier predictions of rate cuts.Initially, UBS anticipated two rate reductions this year, but
fresh data hinting at sustained inflation has adjusted their outlook.Now, they believe the Fed might not only withhold cuts but possibly
elevate rates, significantly affecting both the bond and stock markets.Recent economic indicators in the U.S
reveal a surprising strength, prompting financial markets to reconsider the likelihood of monetary easing.UBS Predicts Potential Fed Rate
(Photo Internet reproduction)UBS strategists Jonathan Pingle and Bhanu Baweja suggest that if economic strength persists and inflation
exceeds 2.5%, the FOMC could start raising rates early next year, aiming for 6.5% by mid-year.This revised stance aligns with a broader
banking sector realization
The aggressive rate hikes of the 1980s, which elevated the Fed rate to 5.5%, might resume.UBS has scaled down its drastic cut forecast from
drastically flatten the U.S
Treasury curve, with significant yield increases and a potential 10% to 15% downturn in the equity market.UBS Predicts Potential Fed Rate
Hike to 6.5%This update follows recent data that inflation rates and retail sales in the U.S
are surpassing expectations, signaling that inflation might be digging in more deeply than anticipated.As traders drastically reduce their
lead to plummeting government debt and widening credit spreads, significantly affecting market valuations.This narrative frames a critical
economy, balancing growth with the specter of rising inflation and interest rates.
