Wall Street Now Expects a Quarter-Point Fed Hike
Goldman Sachs and J.P. Morgan expect the Federal Reserve to raise rates by a quarter point at its September 15-16, 2026 meeting. Reuters Those calls were reported on September 14, one day before the meeting opened.
Morgan Stanley holds the same view. Matt Hornbach, global head of macro strategy at Morgan Stanley, said on September 14 he expects a 25 basis-point hike on Wednesday. Bloomberg A basis point is one-hundredth of a percentage point, so 25 equals a quarter point. Wednesday is the second day of the scheduled meeting.
On September 12 Goldman Sachs published 'What a Fed Rate Hike Could Mean for US Stocks' featuring Jonathan Shugar, head of Cross Asset Sales. Shugar said a rate hike may not stop the U.S. stock market from climbing.
Bond pricing had pointed that way over the summer. A Goldman Sachs briefing called 'The Outlook for the Fed' stated the bond market priced a 55% chance of a September hike as of July 29.
That hike call reverses Goldman's earlier Research path. Goldman Sachs Research expects cuts in June and December 2027, revised from December 2026 and March 2027 previously. Goldman Sachs That view was published on June 9, 2026. An earlier outlook on December 3, 2025 forecast two more cuts next year, leaving rates at 3-3.25%.
Morgan Stanley shows the same turn. Its 'Thoughts on the Market' series included 'Fed Rate Cut September 2025' with Matthew Hornbach and Michael Gapen. That discussion stated markets priced a 90 percent chance of a September cut. It featured Hornbach on a policy paradox around a 25 basis-point cut. Its October FOMC meeting recap states the Fed cut by 25 basis points in October in a non-unanimous decision.
The broader context here is a reset in expected Fed behavior, not just one meeting. When forecasts swing from cuts in 2027 to a hike now, bets on bonds, stocks and hedges must adjust together. Think of the Fed's playbook being rewritten. The rates question is whether this is a single step or a series. The stocks question, in Shugar's terms, is whether earnings can carry the market despite higher rates.
Looking at what this means for positioning, split votes look central. The October cut was non-unanimous, so disagreement can add swings around the statement, the dot plot of future rates, and the press conference. Funding and short-term trading feel it first. In my view, Wednesday matters less than how the Chair frames the bar for a second move.
