Economy May 13, 2026 05:13 AM

UBS Wealth Management Pushes Fed Rate Cuts Further Out as Inflation and Jobs Remain Firm

Persistent energy-driven inflation and a resilient labor market prompt UBS to delay expected easing until late 2026

By Sofia Navarro
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UBS Global Wealth Management has revised its U.S. monetary policy outlook, postponing expected rate cuts after April's inflation spike and stronger-than-expected employment data. The wealth arm now anticipates 25 basis point cuts in December 2026 and March 2027, reversing earlier forecasts for reductions later this year. Rising oil prices tied to the ongoing Iran conflict and robust job growth have contributed to a market view that near-term easing is unlikely.

UBS Wealth Management Pushes Fed Rate Cuts Further Out as Inflation and Jobs Remain Firm
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Key Points

  • UBS Global Wealth Management now expects 25 bps Fed rate cuts in December 2026 and March 2027, reversing forecasts for cuts in September and December this year.
  • April's consumer inflation rose to a three-year high with energy inflation accounting for more than 40% of the increase; oil prices have been pushed higher amid the ongoing Iran conflict (now in its 11th week).
  • Labor-market strength persisted in April, with job growth beating expectations and unemployment steady at 4.3%, contributing to reduced urgency for near-term Fed easing; market pricing shows roughly an 87.4% chance of no policy easing in September.

May 13 - UBS Global Wealth Management has joined a growing number of brokerages in delaying expectations for U.S. interest-rate reductions, citing persistent inflation and a resilient labor market alongside continued economic growth.

In a note released on Tuesday, UBS analysts led by Andrew Dubinsky said the firm now expects the U.S. Federal Reserve to implement two 25 basis point cuts - one in December 2026 and another in March 2027. That timetable reverses the brokerage's earlier forecast for two 25 basis point reductions in September and December of this year.

"The conditions needed to justify a September move - particularly sustained core goods disinflation and reduced supply-side uncertainty - have not yet been met," the UBS team wrote. "At the same time, growth and labor market conditions have reduced the urgency of a near-term cut," UBS said.

UBS's revision reflects a broader shift across the brokerage community, where many firms have pushed back or abandoned expectations of policy easing in the near term. Traders have also adjusted their portfolios and rate expectations accordingly.

Contributing to the changed outlook is the Iran war, which has entered its 11th week with no clear ceasefire. That conflict has helped lift oil prices, amplifying concerns about inflation. U.S. consumer inflation accelerated to a three-year high in April, with energy costs responsible for more than 40% of the month-to-month increase.

Labor-market data released last week reinforced the case for a later easing timetable. Payrolls in April showed stronger-than-expected job growth and the unemployment rate remained at 4.3%, a signal of continued labor-market resilience that, according to UBS, reduces the urgency for immediate rate relief.

Market pricing has reflected these developments. The CME FedWatch tool shows traders assigning roughly an 87.4% probability that the Fed will not begin easing policy in September.

Separately, investment screening tools have highlighted interest in individual stocks amid this macro backdrop. One such tool, ProPicks AI, poses the question: "Should you invest $2,000 in UBSG right now?" The service evaluates UBSG alongside thousands of other companies each month using more than 100 financial metrics. According to its materials, the AI seeks to identify stocks with favorable risk-reward profiles and cites past winners including Super Micro Computer (+185%) and AppLovin (+157%).


Taken together, the mix of higher energy prices, stronger-than-expected employment figures and a shift in brokerage forecasts point to a market increasingly resigned to a later timetable for Fed easing than was assumed earlier this year.

Risks

  • Continued elevated energy prices tied to the Iran conflict could sustain inflationary pressure - this mainly affects energy and consumer sectors.
  • A resilient labor market and stronger-than-expected economic growth may delay rate cuts further, which could pressure interest-rate-sensitive sectors such as real estate and financials.
  • Shifts in market expectations toward later easing increase uncertainty for portfolios that had priced in earlier Fed rate reductions, affecting investors across equity and fixed-income markets.

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