Anticipation of a 25-Basis-Point US Interest Rate Hike in December

Rising US inflation is strengthening expectations that the Federal Reserve will continue to raise interest rates, with a 25-basis-point increase now considered likely for December—contrasting with the expectation that rates will remain unchanged in October.

These projections come as inflation hovers near 3%, driven by higher energy and gasoline prices, alongside rising costs for certain services—factors that increase the likelihood of interest rates remaining elevated for a longer period.

Furthermore, UBS has adjusted its outlook to include an additional rate hike in March 2027. Given that inflation remains near 3% and energy prices are high, this suggests that a restrictive monetary policy could persist for an extended duration.