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.