Goldman Sachs, JPMorgan, Morgan Stanley and other major institutions now expect at least one Federal Reserve rate hike, with forecasts ranging from 25 to 75 basis points for 2026.
After stronger than expected inflation and higher oil prices due to renewed tension in West Asia, all brokerages and major banks have turned more hawkish and are forecasting interest rate increases in 2026. Wall Street is expecting the benchmark rate to be raised by 25 basis points in its ongoing FOMC meeting, which will emerge as the first rate hike by the US Fed since July 2023. According to Reuters, the markets are pricing in about a 93 per cent probability of a quarter-point hike.
Morgan Stanley turned more hawkish
After more than the expected inflation reading, Morgan Stanley joined in the camp of brokerages and banks who expected at least two rate hikes in 2026, one in September followed by a rate hike in December. The broking highlighted that the disinfection process has been slower than expected.
Similar to Morgan Stanley, JP Morgan is also pricing in two rate hikes in 2026. HSBC and Deutsche Bank also expect a September increase, with Deutsche Bank seeing another hike later in the year.
Bank of America has maintained one of the more aggressive forecasts, expecting three 25-basis-point increases this year, or 75 basis points in total. Its forecast calls for hikes in September, October and December. Deutsche Bank had earlier projected 50 basis points of tightening in 2026.
More from BusinessThe shift reflects persistent inflation pressures, oil prices above $100 a barrel and concerns that the recent slowdown in inflation may not be sufficient for the Fed to return quickly toward its 2 per cent target.
The major uncertainty now is what follows the September move. Forecasts among banks range from a single 25-basis-point increase to as much as 75 basis points of tightening through December, underscoring the unusually wide divergence over the Fed’s policy path.
