UBS's Reiman: US Economy Can Absorb Two Fed Rate Hikes as Multiple Factors Drive Yields Higher

The Quick Take

• UBS Global Wealth Management's Kurt Reiman says multiple factors — not just the deficit — are pushing US Treasury yields higher
• Reiman expects two Federal Reserve interest-rate hikes in 2026, viewing the US economy as resilient enough to withstand tighter policy
• Senior UBS analyst dismisses Fed officials who argue current rates are already restrictive as 'just ridiculous'

Kurt Reiman, head of fixed income at UBS Global Wealth Management, delivered a hawkish macro assessment in a Bloomberg interview, arguing the US economy remains robust enough to withstand two additional Federal Reserve rate hikes in 2026. Reiman pushed back on the prevalent view that the fiscal deficit alone is driving the recent yield surge, attributing the move to a confluence of factors including strong economic data, elevated inflation expectations, and structurally higher neutral rate estimates as the post-pandemic policy adjustment continues.

The UBS stance challenges the market consensus that has been pricing in Fed rate cuts in H2 2026. If Reiman is correct that the neutral rate has moved structurally higher, equity markets face a longer-than-expected period of higher discount rates, which disproportionately affects long-duration assets including growth tech and real estate. His dismissal of Fed officials who describe current rates as restrictive — calling that view 'just ridiculous' — signals UBS is positioned for a more aggressive Fed path than prevailing futures imply.

The key variable that will resolve this debate is the trajectory of US core inflation in Q4 2026. If PCE inflation remains above 3%, the case for two more hikes becomes compelling and could trigger a significant repricing in rate futures. Investors should watch Fed Chair commentary at the next FOMC meeting for any shift in the Fed's own assessment of the neutral rate, as well as US GDP data revisions — a downward revision to growth would undercut the UBS view and potentially restore rate-cut expectations.

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