UBS Sees Two 2026 Fed Hikes as Trump Demands Cuts — SkimNews
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- UBS forecasts two 25bps hikes in 2026 (September and December), with CIO Mark Haefele stressing that the backdrop of the move matters more than the hike itself—distinguishing hikes driven by economic strength from those responding to inflation problems.
- CME FedWatch shows 58.4% odds of a 25bps hike at the Sept. 16 FOMC meeting, which would lift the target range to 3.75%–4%, driven by August's surprisingly strong 162,000 payroll additions and unemployment holding steady at 4.1%.
- Macquarie shifted its baseline call for the first hike to September from December, while continuing to expect a second 25bps increase in Q1 2027.
- BLS data shows inflation at 3.4% year-over-year—well above the Fed's 2% target—with the next CPI report due Friday and analysts expecting further pressure from the Middle East conflict and tariffs.
- Bank of America warned that a decision not to hike with odds above 50% could undermine Fed credibility and push long-end yields higher, complicating Treasury Secretary Scott Bessent's recent buyback operations.
- President Trump demanded rate cuts on Truth Social, threatening to halt U.S. trade with countries running trade surpluses against the U.S., while VP JD Vance argued lower rates would help Americans afford homes.
Why it matters: Trump installed Kevin Warsh as Fed chair yet is now publicly threatening to halt trade with surplus countries if rates don't fall—escalating political pressure just as UBS, BofA, and Macquarie forecast a hike at the Sept. 16 meeting. A hawkish move would push long-end yields higher and complicate Bessent's Treasury buyback strategy.
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