UBS expects the Federal Reserve to deliver four straight rate cuts starting in September, totaling 100 basis points, as inflation holds near target and labor market risks grow. The bank cites July’s tame PCE data, weakening job demand, and increasingly dovish Fed commentary as reasons the FOMC is poised to act.
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UBS has forecast that the Federal Reserve will deliver 100 basis points of easing across its next four policy meetings, starting in September, as cooling inflation and a weakening labor market give policymakers room to act.
The bank points to July’s personal consumption expenditures (PCE) data, the Fed’s preferred inflation gauge, which showed core inflation edging up to 2.9% year-on-year and headline steady at 2.6%. Both were in line with consensus estimates and suggest that price pressures are contained rather than accelerating. Cooling energy prices and steady goods inflation are offsetting stickier services costs, while slowing shelter inflation is also helping to cap overall price growth.
UBS argues that the bigger risk now lies in the jobs market. Although unemployment remains low, recent indicators point to softer demand for labor, and Fed minutes show officials expect the jobless rate to rise above the natural rate by year-end and stay elevated through 2027. Chair Jerome Powell has warned that labor conditions could deteriorate rapidly if layoffs pick up, a risk UBS believes outweighs residual inflation concerns.
The case for cuts is also reinforced by Fed commentary and the shifting balance within the FOMC. July’s meeting saw two dissenting votes in favor of a cut—the first such split among governors in more than three decades—while Powell, Vice Chair Williams, and Governor Waller have all struck a more dovish tone in recent speeches. Waller last week explicitly backed a September cut, even leaving open the possibility of a larger move if job market data weaken further.
With inflation near target, growth resilient but moderating, and policymakers increasingly focused on employment risks, UBS expects the Fed to restart its easing cycle next meeting, and to cut rates at each of its next four meetings:
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September 16 & 17, 2025 (next meeting)
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October 28 & 29, 2025
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December 9 & 10, 2025
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January 27 & 28, 2026 (first scheduled meeting in 2026)
This article was written by Eamonn Sheridan at investinglive.com.