Wells Fargo pushes back Fed rate-cut expectation to June from May

(Reuters) -Wells Fargo on Wednesday joined major banks such as Morgan Stanley, Goldman Sachs and UBS Wealth Management in forecasting the first rate cut from the U.S. Federal Reserve in June.

Wells Fargo, which had previously expected the cut in May, said the Federal Open Market Committee (FOMC) continues to seek "greater confidence" that inflation is heading back to the Fed's 2% target before announcing a rate cut.

Last week, Fed Chair Jerome Powell had said the U.S. central bank was "not far" from gaining the confidence it needs to dial back the level of policy restriction, but has been reluctant to declare an end to the inflation battle.

But a report from the U.S. labour department on Tuesday showed a solid increase in February consumer prices amid higher costs for gasoline and shelter, suggesting some stickiness in inflation.

Despite the second straight month of firmer inflation readings, the composition of the report remained consistent with a disinflationary trend.

"We see building evidence that the labor market is cooling and inflation is still slowing on trend", economists at Wells Fargo said in a note.

The brokerage expects a 100 basis points (bps) cut this year and another 100 bps through 2025, which would bring the federal funds target range to 3.25%-3.50% by the end of 2025.

A Reuters poll of economists also showed on Monday that the Fed would cut its key interest rate in June.

(Reporting by Priyadarshini Basu in Bengaluru; Editing by Tasim Zahid and Shinjini Ganguli)

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