SKN | UBS Reprices the Federal Reserve Path, Now Sees Two Rate Hikes in 2026

Key Takeaways:

• UBS now expects two Federal Reserve rate increases before the end of 2026, at the September and December meetings.
• The revision follows comments from Fed Chair Kevin Warsh and stronger-than-expected U.S. employment data.
• UBS considers the September decision a close call and stresses that its forecast remains dependent on incoming economic data.
• A weaker-than-expected inflation reading could cause UBS to reconsider its newly established rate-hike scenario.

UBS has materially revised its Federal Reserve outlook, moving from a more accommodative expectation to a forecast of two 25-basis-point rate increases before the end of 2026. The shift reflects the Swiss bank’s interpretation of Federal Reserve Chair Kevin Warsh’s recent policy comments alongside stronger-than-expected U.S. employment data.

Why UBS Changed Its Federal Reserve Forecast

UBS analysts Jonathan Pingle, Abigail Watt and colleagues placed particular weight on Warsh’s remarks at the Federal Reserve’s Jackson Hole event. Warsh emphasized that policymakers must have confidence that underlying inflation is moving toward the Fed’s 2% objective clearly and at sufficient speed, while identifying interest rates as the primary monetary-policy instrument.

UBS interpreted those comments as a stronger signal that Warsh could support tighter policy if inflation does not progress sufficiently. The analysts argued that he had effectively put his monetary-policy credibility behind those principles, strengthening the case for rates to move higher.

UBS Now Expects September and December Hikes

Under its revised scenario, UBS expects the Federal Reserve to raise rates by 25 basis points in September and another 25 basis points in December. The change comes as financial markets increasingly price the possibility of a near-term increase, following employment data showing that the U.S. economy added substantially more jobs than expected in August.

For UBS, the combination of labor-market resilience and Warsh’s inflation framework creates a credible case for tighter monetary policy. Yet the bank is careful not to present the forecast as definitive. It describes the outlook as “not high conviction” and explicitly ties its assessment to incoming economic data.

September Remains a Close Call for UBS

UBS considers the September decision particularly finely balanced. The bank expects Warsh to weigh his previously stated policy principles against market pricing, movements in interest rates since the previous meeting and the arguments presented by other Federal Reserve policymakers.

That conditional stance is important for global wealth management. A materially weaker-than-expected August consumer price index reading could, according to UBS, “undo” its current assessment. The bank is therefore not treating its two-hike forecast as a fixed policy trajectory, but as a scenario that remains sensitive to inflation and labor-market evidence.

For internationally diversified wealth, UBS’s shift matters because a higher-for-longer U.S. rate environment can influence bond yields, currency positioning, financing costs and cross-border liquidity decisions. The immediate issue is not simply whether the Fed raises rates, but whether inflation and employment data validate the more restrictive policy path UBS now anticipates.

For a confidential discussion regarding your cross-border banking structure, currency exposure, liquidity planning or international wealth strategy, contact our senior advisory team.