• UBS Global Wealth Management maintains that Federal Reserve rate cuts remain likely in 2026 despite strong jobs data and easing U.S. inflation, projecting two 25-basis-point cuts in June and September to support equities, bonds, and gold.
  • Markets have since adjusted to price about 50 basis points of cuts starting in July, trimming expectations from 60 basis points earlier, according to LSEG data.
  • The Fed held rates steady at 3.5–3.75% in its January 2026 meeting, citing a resilient economy, inflation near 3%, and low unemployment, with no immediate cuts justified.

UBS Global Wealth Management, a division of Swiss multinational investment bank UBS Group AG (UBS), is sticking to its guns on Federal Reserve easing this year, even as recent economic data complicates the picture. In a note to clients, the firm argued that easing U.S. inflation should keep the central bank on track for rate cuts, though the timing might be pushed back.

"We expect two 25-basis-point cuts in June and September," a UBS strategist said, speaking on condition of anonymity because the report hasn't been publicly released. "This should support equities, bonds, and gold as liquidity conditions gradually improve."

But the market isn't fully buying it. After a stronger-than-expected labor report, traders have scaled back their bets. They now price in about 50 basis points of cuts this year, down from 60, and see the first move coming in July instead of June, per LSEG. That shift reflects growing skepticism about how quickly the Fed will pivot, especially with the economy humming along.

Efforts to ease monetary policy have hit a snag, thanks to robust growth forecasts of 3.5–4% for 2026 and fiscal stimulus from the 2025 One Big Beautiful Bill Act, which injected roughly $100 billion via tax cuts and refunds. That's boosting GDP but also risks keeping inflation stubbornly above the Fed's 2% target. Without clearer signs of disinflation, the central bank might delay action longer than UBS anticipates.

Inside the Fed, there's a tug-of-war. Hawkish voices like Cleveland's Beth Hammack and Dallas's Lorie Logan are advocating patience until inflation decisively falls. "We need more evidence," one Fed official said recently, echoing a common sentiment among policymakers who worry about cutting too soon. Meanwhile, the incoming mix of regional Fed presidents—six dovish, four neutral, two hawkish voters—could tilt the committee toward easing later this year, but not without a fight.

For now, the Fed is in a holding pattern. It paused after cutting rates by 1.75% since September 2024, including three cuts in 2025, and left rates unchanged in January. Inflation has lingered around 3% for the past two years, well above target, making officials cautious. CME FedWatch data as of February 11 shows limited easing expectations, with about a 32% chance of two cuts and 30% for one by year-end.

What's next? All eyes are on Friday's January CPI data, which could sway the debate. If it shows inflation cooling faster than expected, UBS's forecast might gain traction. But if it's hot, the Fed could stay sidelined even longer. Bankrate forecasts three cuts totaling 0.75% in 2026, while J.P. Morgan (JPM) analysts warn that rate hikes might be back on the table by Q3 2027 if labor stays tight and inflation declines only gradually.

Attempts to reach UBS for further comment were unsuccessful. The firm's outlook, while optimistic, underscores the delicate balance the Fed faces: supporting growth without reigniting price pressures. For borrowers and homebuyers, relief might be delayed, keeping rates near decade-highs. For investors, the waiting game continues.