UBS Forecasts Two More Fed Rate Hikes Through March 2027

UBS expects the Federal Reserve to raise interest rates in December and March, projecting two more increases after the Fed’s September move. The forecast sets out the bank’s view through March 2027; the Fed has not announced those future decisions.

Market pricing reflected roughly 3.5 additional rate increases after September, compared with UBS’s forecast of two.

September’s Consumer Price Index rose 0.6% from August and 3.7% over the 12 months through September. Core CPI, which excludes food and energy, increased 0.3% for the month and 2.6% over the year. UBS’s forecast pointed to September CPI and price increases across categories including shelter, airfares, vehicles, apparel and technology-related goods.

Separate September data showed the Producer Price Index for final demand rose 1.3% from August, seasonally adjusted, and 6.3% over 12 months, unadjusted. Those figures describe producer prices; they are separate from the consumer inflation data cited in UBS’s outlook.

The Federal Open Market Committee voted 12-0 on Sept. 16 to raise its target range by a quarter percentage point, to 3.75%-4.00%. The Fed’s next scheduled meeting is Oct. 27-28, ahead of UBS’s projected December increase.

UBS also raised its year-end forecast for the 10-year Treasury yield to 4.9% from 4.6%. The bank expects its revised rate and yield outlook to leave its positive view of U.S. assets intact. The next scheduled Fed meeting begins Oct. 27.