UBS Expects Two Rate Hikes from the Fed

The crypto market has come under significant selling pressure: most leading cryptocurrencies are declining. The drop followed the release of U.S. inflation data, which exceeded expectations and strengthened bets on a hawkish stance by the Federal Reserve. Earlier on Thursday, Bitcoin briefly fell below $82,000 before recovering, and altcoins also showed significant losses. Over the past 24 hours, liquidations in the crypto market have exceeded $900 million.

Swiss bank UBS has revised its forecast for the Federal Reserve's rate following the release of inflation data. It now expects two rate hikes: possibly in December 2026 and another in March 2027. Previously, the bank expected only one hike in December 2026. Market commentator Walter Bloomberg reported the forecast revision on X. According to him, inflation is spreading beyond energy to goods and services, complicating the Fed's task of returning inflation to its 2% target. The market is even more hawkish: based on current quotes, investors are pricing in almost five rate hikes, more than UBS predicts.

Data on the Producer Price Index (PPI) for September was released the day before. The overall PPI rose by 1.3% for the month against a forecast of 0.6%, and on an annual basis reached 6.3% against the expected 5.4%. The core PPI rose by 0.7% for the month against a forecast of 0.3%, and on an annual basis amounted to 5.0% against the expected 4.4%. A day earlier, the U.S. Consumer Price Index (CPI) also exceeded expectations and stood at 3.7%. According to CME FedWatch, the probability of a Fed rate hike in December now exceeds 66%.

The next Federal Reserve meeting (FOMC) will take place on October 28. Hawkish comments from the regulator regarding further rate hikes could increase volatility in financial markets, including the crypto market. As noted in the material, higher borrowing costs could reduce liquidity and weaken demand for risky assets, including cryptocurrencies.