Matt Hornbach, global head of macro strategy at Morgan Stanley, anticipates a 25 basis-point interest rate hike at the upcoming Federal Open Market Committee meeting scheduled for September 15–16. This move would mark the first increase since July 2023.
The shift in expectations follows August inflation data that exceeded economist forecasts. A Reuters survey indicates that 85% of economists now expect the Federal Reserve to raise the benchmark target range to 3.75%–4.00%.
Financial markets reflect this sentiment, with futures contracts pricing in an 87% to 90% probability of a quarter-point hike. Strategists at Goldman Sachs and J.P. Morgan have also updated their forecasts to align with this outlook.
Analysts suggest that additional rate increases may occur later in 2026 or early 2027, as economic growth remains resilient and inflation persists above the 2% target. Market participants are closely monitoring the upcoming Summary of Economic Projections.
If the Federal Reserve proceeds with the hike and signals further tightening, Treasury yields could rise, increasing borrowing costs for mortgages and corporate debt. Sectors such as real estate and utilities are expected to face the most significant pressure.
