Path, destination of interest rates more important than timing of first cut: UBS

Since the start of 2024, investors have been mainly fixated on when the Federal Reserve will begin cutting rates.

“Consequently, expect the debate over the pace, magnitude, and terminal level for rate cuts to be front and center this summer, a point made in our second-half outlook,” analysts added. Firstly, fluctuations in the 10-year Treasury yield have closely mirrored changes in market expectations for the neutral federal funds rate, suggesting that shifts in anticipated Fed rate cuts could similarly impact the 10-year yield.

Lastly, the lack of a clear framework from the Fed regarding the rate-cutting path is a source of potential market volatility.

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