Wall Street has turned decisively hawkish ahead of the Federal Reserve’s September policy decision, with 19 of 22 major banks and research firms expecting the central bank to raise interest rates.
The shift follows stronger-than-expected inflation data and a surge in oil prices that has revived concerns about persistent price pressures. Reuters reported that major institutions including JPMorgan, Goldman Sachs, HSBC and Deutsche Bank now expect the Fed to increase its benchmark rate by 25 basis points at its September 15–16 meeting.
Financial markets have moved in the same direction. As of September 16, traders were assigning roughly a 90% or greater probability to a quarter-point increase, which would mark the Fed’s first rate hike in more than three years.
Most Banks Expect More Than One Hike
The biggest disagreement on Wall Street is increasingly not whether the Fed will tighten in September, but what happens afterward.
A compilation of forecasts shows that a large group – including JPMorgan, Morgan Stanley, Citigroup, Barclays, UBS, HSBC and Wells Fargo – expects the Fed to begin tightening in September and deliver a cumulative 50 basis points of increases during 2026.
That would imply another rate increase after this week’s expected quarter-point move.
At the hawkish end of the spectrum, Bank of America, Deutsche Bank and RBC expect cumulative tightening of 75 basis points this year.
Goldman Sachs is considerably more cautious. The bank now expects a 25-basis-point September hike but projects only 25 basis points of total tightening in 2026, effectively treating this week’s expected move as the only increase this year.
Jefferies and Oxford Economics Break With Consensus
Not every forecaster believes a new tightening cycle is beginning.
Jefferies stands out with an expectation that the Fed’s next rate move will instead be a 25-basis-point cut in December. Oxford Economics expects the central bank to leave rates unchanged throughout 2026 and begin easing only in 2027.
Oxford Economics’ Michael Pearce has argued that underlying inflation is closer to the Fed’s target than headline figures suggest and that raising rates could ultimately force policymakers into an early reversal if economic conditions deteriorate.
The split highlights the unusual economic environment confronting the Fed: inflation has accelerated while policymakers must simultaneously assess the risk that tighter financial conditions could weaken growth.
Inflation and Oil Push Wall Street Toward Higher Rates
The dramatic change in expectations followed hotter U.S. inflation readings and an energy shock caused by disruption to global oil supplies.
Brent crude’s move above $100 a barrel has intensified concern that higher fuel and transportation costs could spread through the economy. Reuters reported that stronger producer-price data and elevated oil prices were central to the recent wave of forecast changes among global banks.
Goldman Sachs itself changed its September call only days before the Fed meeting. The bank had previously expected policymakers to leave rates unchanged but switched to forecasting a quarter-point increase, citing market pricing and the risk that officials would be reluctant to surprise investors.
Fed Decision Could Reset the Market Outlook
The consequences extend far beyond the federal funds rate.
Higher policy rates can increase borrowing costs across mortgages, corporate debt and consumer credit while also affecting Treasury yields, equity valuations and the U.S. dollar. For risk assets such as technology stocks and cryptocurrencies, expectations of a prolonged tightening cycle can be particularly important because higher yields increase the relative attractiveness of safer assets.
The immediate market focus will therefore be on more than the September decision itself.
Investors will closely examine the Fed’s updated economic projections and policy signals for evidence of whether officials see the expected hike as an isolated response to inflation or the beginning of a broader tightening cycle.
For now, Wall Street’s message is unusually consistent: the era of waiting for the next rate cut has been replaced, at least temporarily, by expectations that the Fed may need to raise borrowing costs again.
