UBS Projects Two Federal Reserve Rate Hikes in Late 2026

UBS Global Wealth Management expects the U.S. Federal Reserve to deliver two 25 basis point rate hikes in September and December 2026, reversing its previous forecast that projected no policy changes for the remainder of the year. The shift follows a stronger-than-expected August jobs report and hawkish rhetoric from officials.

"[Warsh] threw down the gauntlet. Now, with his credibility on the line, we expect he has little choice but to put his monetary policy where his mouth is," said UBS analysts including Jonathan Pingle and Abigail Watt in a report on Investing.com.

August Jobs Data Drives Shift

U.S. employers added 162,000 jobs in August, while the national unemployment rate held steady at 4.1%, according to data cited by Parameter. This labor market resilience surprised forecasters who had anticipated a more pronounced cooling trend following previous monetary tightening cycles.

Financial markets have quickly priced in the shifting outlook. According to the CME FedWatch tool, traders currently assign a 58% probability to a September rate increase, rising from 52% previously.

Conditional Outlook and Market Reaction

Despite revising their models, UBS analysts noted that their projection for two quarter-point rate hikes is "not high conviction" and remains heavily dependent on incoming economic indicators, including the upcoming consumer price index release.

In public markets, UBS GROUP AG-REG (UBS) shares recently traded at $55.38, down 0.54% from their previous close of $55.68, according to Finnhub market data.

What Is at Stake for Borrowers

A return to rate hikes would reverse expectations of monetary easing, directly impacting borrowing costs across consumer and corporate debt markets. As central bank officials weigh sticky employment figures against inflation metrics, upcoming macroeconomic prints will dictate whether the projected September and December rate adjustments materialize.