UBS Predicts Two US Rate Hikes as Strong Jobs Report Shifts Market Expectations
UBS has revised its interest rate forecast for the US Federal Reserve, now predicting two quarter-point hikes in 2026. The change comes after a stronger-than-expected jobs report, which saw U.S. employers add 162,000 jobs in August, beating expectations.
The strong labor market data and hawkish communication from Fed officials have led to a shift in the brokerage's views. Previously, UBS had expected no policy changes this year, but now sees a 25 basis point hike in September and another in December.
Citigroup and Macquarie have also revised their interest rate forecasts following the employment data. The jobs report follows hawkish remarks from Fed Governor Kevin Warsh at the Jackson Hole symposium in August. However, Fed Governor Christopher Waller said he would support holding rates steady if upcoming data showed inflation pressures continued to ease.
Financial markets are pricing in a roughly 58% chance of a quarter-percentage-point rate hike at the Fed's September 15-16 meeting, up from 52% on Thursday.