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UOB expects an extended Fed pause through 2026 after July CPI

UOB’s base case is a hold through 2026, followed by two 25 basis point cuts in 2027 that would take the federal funds rate to about 3.25% by end-2027.

Reported · Written up by our desk · Central Banks

UOB, via analyst Alvin Liew, outlined expectations for the Federal Funds Rate after the July US CPI release, noting that market pricing for a September hike has fallen.

The bank’s base case calls for an extended pause, with the Federal Funds Rate expected to remain on hold through 2026, according to FXStreet.

UOB projects two 25 basis point cuts in 2027, resulting in a gradual decline in the rate to around 3.25% by the end of 2027.

FXStreet also noted that while the initial reaction to signs of moderating US inflation faded quickly, investors continue to focus on the risk that higher energy prices could rekindle inflation pressures.

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