UBS thinks the market is getting the Fed wrong. The bank’s analysts argue that futures pricing and broader market expectations reflect a more hawkish Federal Reserve than what the data actually supports, and they expect easing to resume with a 25 basis point rate cut in December.
The case for mispricing
Here’s the core argument: UBS sees softening US economic data that the market hasn’t fully absorbed. The bank assigns an 84% probability to a 25 basis point cut in December 2025, which is considerably more confident than the hedging you’d expect from a firm of this size.
The bank doesn’t stop at one cut either. UBS forecasts two additional rate cuts by the end of Q1 2026, painting a picture of a Fed that gradually shifts from inflation hawk back to growth guardian. That’s a total of three cuts in a relatively compressed window, enough to meaningfully reshape the yield curve and rewrite the playbook for rate-sensitive assets.
What the numbers say about growth
