UBS’s Kurt Reiman expects two Federal Reserve rate hikes this year

UBS Global Wealth Management now expects the Federal Reserve to raise interest rates twice before the end of 2026, a sharp reversal from its previous forecast that the central bank would keep rates unchanged through the year. Kurt Reiman, the firm’s Head of Fixed Income Americas, says higher bond yields are being driven by multiple forces, not just ballooning deficits. The call is striking because UBS had previously expected the Fed to either hold steady or ease later in 2026. Instead, the firm now sees two 25-basis-point hikes landing at the September 15-16 meeting and again in December, which would push the federal funds target range up to 4.00-4.25%. What changed the math Two data points appear to have forced UBS’s hand. August nonfarm payrolls came in at 162,000, roughly triple the consensus estimate of around 55,000 to 56,000. The unemployment rate, meanwhile, held steady at 4.1% in August. Then there’s inflation. July’s Personal Consumption Expenditures index, the Fed’s preferred inflation gauge, clocked in at 3.7% year-over-year. That’s well above the 2% target the Fed has been chasing for years, and it gives Chair Kevin Warsh plenty of cover to stay hawkish. Warsh’s remarks...