UBS forecasts two Fed rate hikes in 2026

UBS has reversed its interest rate forecast for the Federal Reserve, now anticipating two quarter-percentage-point rate increases in 2026, specifically in September and December. This shift follows a stronger-than-expected August jobs report and hawkish commentary from Federal Reserve officials, prompting the financial institution to abandon its previous expectation of no policy changes this year. The August employment figures revealed that U.S. employers added 162,000 jobs, significantly exceeding forecasts and marking the strongest monthly gain since March. The nation's unemployment rate remained steady at 4.1 percent, signaling a resilient labor market. This robust data, combined with hawkish remarks from Fed Chair Kevin Warsh at the Jackson Hole symposium in August and concerns over rising inflation risks linked to supply bottlenecks, have collectively influenced UBS's revised outlook. Financial markets have reacted to the economic indicators, with traders increasing the probability of a rate hike at the Federal Reserve's upcoming September 15-16 policy meeting.