UBS pushes back Fed rate cut forecast to December

(Reuters) - UBS Global Research said it now expects the Federal Reserve to start cutting interest rates in December instead of September, while Goldman Sachs and Morgan Stanley continue to expect the first cut in September.

The U.S. central bank on Wednesday pushed out the start of rate cuts to perhaps as late as December, and Fed officials reined in projections for how aggressively they would cut rates this year, from three 25 basis point rate cuts to just one.

"The data is going to need to change a lot of minds to bring people back to cutting in September, and start doing so in the next two months," UBS economists, led by Jonathan Pingle, said in a note dated Wednesday.

J.P.Morgan continues expect the first cut in November, but sees risks tilted 'a little more' toward September than December.

BofA Global Research retained its December forecast for the start of policy easing.

U.S. consumer prices were unexpectedly unchanged in May amid cheaper gasoline, data showed on Wednesday, but inflation remains too high for the Fed to start cutting interest rates before September.

Market expectations for a rate cut in September have fallen to 61.5%, according to CME's FedWatch Tool, after rising to roughly 70% in the wake of the inflation data. Odds for a December rate cut are now at 93%.

(Reporting by Roshan Abraham and Reshma Rockie George in Bengaluru; Editing by Sonia Cheema and Varun H K)

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