: What’s driving Wall Street’s gloomiest economic forecast

by | Nov 14, 2023 | Stock Market

UBS economists are not, it should be said, predicting an asteroid to hit the planet. But their view on interest rates is wildly different than the rest of Wall Street and reflects a gloomy forecast for the U.S. economy next year. They expect the federal funds rate, now between 5.25% and 5.5%, to fall all the way to 2.75% by the end of next year, and then further down to just 1.25% in the first quarter of 2025.

There isn’t really any other firm even close. TD Securities expects rates to fall to 3.5% by the end of next year and then to 3% in the first quarter of 2025. The median, per Bloomberg News data, is for rates to fall to 4.5% at the end of 2024 and further down to 4% in the first quarter of 2025. There are a few firms, notably Bank of America and Goldman Sachs, forecasting the Fed rate to be above 5% by the end of 2024, as does the Federal Open Market Committee itself. The UBS team led by Jonathan Pingle say the big boost from COVID-era savings is wearing off. “Households’ excess savings are …

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