UBS Expects Two Rate Hikes in 2026 as Yields Approach Multi-Year Highs

Swiss bank UBS predicted two additional US interest rate hikes during 2026, amid persistent inflationary pressures, pushing US Treasury yields toward their highest levels in years.

The bank explained in a recently released report that the US Federal Reserve will continue its contractionary monetary policy in the coming months, as inflation indicators have not slowed down fast enough to justify pausing rate hikes or beginning rate cuts.

In the same context, 10-year US Treasury bond yields are approaching multi-year highs, reflecting market pricing for a higher-for-longer interest rate environment than previously expected.

These forecasts indicate that global financial markets are entering a phase of increasing pressure, making US Federal Reserve decisions the primary driver of global capital movement in the coming period.

What do these terms mean?

Bond Yields: The annual return an investor receives for holding a government bond, which typically rises with expectations of interest rate hikes.

Contractionary Policy: A monetary policy aimed at reducing the amount of circulating money and curbing inflation by raising interest rates and shrinking balance sheets.

Treasury Bonds: Debt instruments issued by the US government to finance its spending, serving as a global benchmark for pricing risk and determining interest rates.