UBS Global Wealth Management has revised its outlook for the Federal Reserve, now anticipating two interest rate hikes before the end of 2026. The firm previously projected that rates would remain unchanged throughout the year.
The new forecast includes two 25-basis-point increases scheduled for the September 15-16 meeting and December. These adjustments would bring the federal funds target range to 4.00-4.25%.
The revision follows August nonfarm payroll data, which reached 162 000, significantly exceeding the consensus estimate of 55 000 to 56 000. The unemployment rate remained at 4.1% in August, while the July Personal Consumption Expenditures index stood at 3.7%.
UBS has also updated its Treasury yield projections. The firm raised its two-year Treasury yield forecast by 100 basis points to 4.25% by June 2027, and increased the 10-year yield forecast by 40 basis points to 4.5% for the same period.
The firm advises clients to maintain portfolio diversification and focus on high-quality bonds with medium- to long-term maturities. UBS maintains a cautiously optimistic outlook on global equities despite the potential for increased borrowing costs.
