UBS expects the Federal Reserve to cut interest rates again at its October policy meeting and possibly announce the end of quantitative tightening (QT).

“We continue to expect a 25 basis point rate cut at the October FOMC meeting on Wednesday, October 29,” UBS economist Jonathan Pingle said in a note, adding that Chair Jerome Powell’s latest remarks “suggested little had changed” since September. 

The cut would bring the federal funds rate range down to 3.75% to 4.00%.

According to Pingle, “Chair Powell this week signaled the end of QT could be approaching in the coming months.” 

The bank noted that the “narrowing spread between the effective funds rate and interest on reserve balances could mean that a decision to end runoff comes as soon as the October meeting.” 

If not, UBS said, “we would expect an end to QT by or at the end of this year.”

The economist highlighted that the Federal Open Market Committee is focused on preventing a slowdown in hiring from feeding into consumer anxiety. 

“We have been writing that one reason to remove restrictiveness has been to end the slowdown in hiring lest it risk spilling over into household perceptions of job security,” UBS wrote, noting Powell highlighted those risks in recent comments.

UBS also argued that the Fed’s benchmark rate “is a poorly designed tool for stopping tariff-related cost-push inflation.” 

Given those constraints, the report said, “risk management considerations appear to have led to the FOMC eyeing multiple rate cuts this year,” consistent with UBS’s forecast for a continued easing cycle.