UBS Predicts Two Fed Hikes in 2026 Following Strong August Jobs Data

UBS has revised its interest rate forecast for the Federal Reserve to anticipate two rate hikes this year, following stronger-than-expected August jobs data.

The bank now expects a 25-basis-point increase in both September and December, reversing an earlier prediction of no policy changes. The shift comes after a strong employment report showing US employers added 162,000 jobs in August, surpassing forecasts of roughly 55,000.

Financial markets were pricing in about a 60.4% probability of a rate hike at the Fed's September 15-16 meeting, according to CME's FedWatch tool.

The investment implications would depend on the reason behind any Fed tightening, UBS strategists said. A rate hike driven by stronger economic growth would have different consequences from one prompted by persistent inflation and weaker growth.