UBS expects Fed to cut rates despite persistent price pressures

UBS believes that upward pressure on prices is likely to persist through the remainder of this year and into 2026, but the bank still sees scope for the Federal Reserve to begin easing policy.

In a note to clients, UBS’s global head of equities said that with overall inflation likely to remain contained against the backdrop of a slowing US economy, the Fed is expected to resume interest rate cuts at its September meeting. The bank’s base case is for a total of 100 basis points in rate reductions over the easing cycle.

UBS said that while price pressures will continue, the combination of weaker growth and moderating core inflation should allow the central bank to focus more on supporting the economy, rather than holding rates at restrictive levels for an extended period.