UBS flips to calling two Fed hikes this year as August payrolls beat, with Trump pushing the other way

UBS has reversed its Federal Reserve call, moving from expecting no policy change this year to forecasting 25 basis point hikes at both the September and December meetings . The trigger was the August employment report: employers added 162,000 jobs against expectations of roughly 56,000, with the unemployment rate steady at 4.1% and average hourly earnings up 0.3% on the month and 3.1% on the year. Manufacturing added 16,000 in August and 58,000 since December 2025.

Markets moved with it. CME's FedWatch tool showed roughly a 58% probability of a quarter-point hike at the September 15-16 meeting, up from 52% on Thursday. Other readings of short-term interest-rate futures put the figure higher, at 62% to 65% after the report against about 55% before, so the precise number depends on which instrument you read; the CME FedWatch figure is the one with a named methodology behind it. The target range has stood at 3.50% to 3.75% since a cut in December 2025.

UBS did not attribute the change to the labour data alone. It cited hawkish Fed communication, in particular Fed Chair Kevin Warsh's Jackson Hole speech, and rising inflation risks from supply bottlenecks, alongside the August figures. That combination is what turned a no-change house view into a two-hike path in a single week, and it is worth holding the forecast loosely: this is a data-dependent call made days after the data, not a high-conviction structural view.

One framing circulating with this story needs correcting. The political pressure on the Fed right now runs toward cuts, not hikes. Trump has demanded substantially lower rates, arguing high borrowing costs leave the United States at an international disadvantage, and tied that demand to trade policy by saying the Fed should lower rates or he would stop trading with countries with which the US runs a deficit. Those two forces are opposed, not reinforcing: the jobs data is pushing hike odds up while the White House pushes for cuts. There is a second-order twist worth watching, which is that restricting imports over a trade dispute would itself be inflationary, and would therefore make the Fed less able to cut rather than more. September 15-16 is the decision point.

Related Stocks

• UBS