UBS CEO Sergio Ermotti expressed skepticism about central banks having inflation under control in an interview with Swiss newspaper Le Matin Dimanche. He stated that he is not convinced that inflation is really under control and emphasized the importance of remaining agile in the face of potential inflationary pressures. Ermotti also mentioned UBS's plan to cut 3,000 jobs in Switzerland following its takeover of Credit Suisse. The interview comes after Federal Reserve Chair Jerome Powell indicated that interest-rate increases were likely over in the United States. However, central banks, including the European Central Bank, have maintained plans to keep policy tight.
UBS chief U.S. economist Jonathan Pingle believes that another global financial crash is not imminent. Despite indicators like U.S. credit card debt pointing toward financial and economic pressures, Pingle suggests that credit tightening and rising debt levels could impact the economy in 2024. The Federal Reserve has been hiking interest rates since March 2022 to combat inflation, but Pingle believes there is still progress to be made towards the 2% inflation goal. UBS predicts significant rate cuts in 2024 to prevent economic weakening. Unemployment is expected to rise close to 5% next year. Overall, Pingle is optimistic that a global financial crisis is not on the horizon.
UBS U.S. chief economist Jonathan F. Pingle predicts an upcoming economic slowdown in the U.S. based on several indicators. These indicators include U.S. households adding leverage and spending more, manufacturing plant construction surging but fiscal support likely to decline in 2024, recession probability models showing resilience but still elevated, real PCE growth heavily reliant on wealth, savings, and credit, credit conditions remaining tight, service PMIs at low levels, layoff announcements rising to pre-Covid levels, and UBS expecting inflation to continue its downward trend. If inflation returns to 2% or below and the economy weakens, the central bank may want to make rate cuts of greater than 400 basis points.
Mohamed El-Erian, president of Queens' College Cambridge and Bloomberg Opinion columnist, expects only two rate cuts this year from the Federal Reserve. He sees reasons to believe that the U.S. economy may slow down. Businesses are worried about the outlook for the rest of the year. El-Erian's statement was made in a video interview on Wiscnews.com.
CNBC's Jim Cramer suggests that disappointing quarters from trucking company J.B. Hunt and real estate investment trust Prologis may be a sign of a weakening U.S. economy due to elevated interest rates. However, Cramer believes it is still too early for the Federal Reserve to start cutting rates. He acknowledges that companies in economically sensitive industries like trucking and warehousing did show less-than-ideal earnings results. Cramer maintains that the economy is too strong for rate cuts and advises investors not to expect the Fed to start easing rates. The Federal Reserve Chair, Jerome Powell, recently stated that inflation has not declined enough for the central bank to consider rate cuts in the near future. Prologis and J.B. Hunt did not immediately respond to requests for comment.
Jim Cramer, a CNBC commentator, points to signs of a slowing economy in the U.S. based on weak earnings reports and PMI data. He refers to these factors as 'brown shoots' that are disrupting U.S. economic growth. Cramer believes that the combination of anecdotal evidence and the PMI report justifies the Fed cutting rates. The S&P Global Flash US composite purchasing managers index showed lower-than-expected readings for manufacturing and services, with the former at its lowest reading in four months. The report also indicated a workforce reduction in services, the most pronounced since the end of 2009. Cramer sees this as bad news for the economy but necessary to cool off inflation. He mentions specific companies like CarMax and RH that have been affected by high financing charges and a lack of new home sales. Cramer concludes that the recent earnings misses and PMI data could bring rate cuts from the Fed.
Paul Christopher of the Wells Fargo Investment Institute discussed March's highly anticipated PCE inflation report during an appearance on 'Mornings with Maria' on Fox Business. Christopher highlighted the service sector's pricing power as a potential problem for the US economy. He explained that the service sector, which makes up a large portion of the US economy, has seen significant price increases due to supply chain disruptions and labor shortages. Christopher believes that these price increases could lead to higher inflation and impact consumer spending. He also mentioned that the Federal Reserve will be closely watching the service sector's pricing power and its impact on inflation when making decisions about interest rates. Overall, Christopher expressed concern about the potential negative effects of the service sector's pricing power on the US economy. [02d2e807]