UBS Revises U.S. Fed Rate Forecast from Hold to Two Hikes

[Financial News] Swiss banking giant UBS has revised its forecast to predict that the Federal Reserve System (Fed) will raise interest rates twice this year, citing stronger-than-expected U.S. employment in August. UBS had previously expected rates to remain unchanged for the rest of the year, but now forecasts 0.25-percentage-point hikes in September and December.
According to British media on the 7th (local time), UBS Global Wealth Management said in a report on the 4th that it expects the Fed to raise its benchmark interest rate by 0.25 percentage points at the Federal Open Market Committee (FOMC) meeting scheduled for the 15th and 16th, with another hike of the same size in December.
UBS stated, "Hawkish communication, particularly Kevin Warsh's Jackson Hole speech, increased inflation risks stemming from supply bottlenecks, and strong August labor-market data were strong enough to change our previous forecast."
U.S. nonfarm payrolls increased by 162,000 in August, significantly exceeding market expectations. The unemployment rate held steady at 4.1%, showing that the labor market's resilience has continued.
Following the strong employment report, Citigroup and Macquarie Group also revised their U.S. interest-rate forecasts, alongside UBS.
Market attention has now shifted to the U.S. August Consumer Price Index (CPI), due to be released on the 11th. If inflation data also comes in strong after the robust employment figures, expectations for a September rate hike are likely to gain further momentum.
[email protected] Hong Chae-wan Reporter