Catenaa, Monday, September 14, 2026- Goldman Sachs, JPMorgan, HSBC, and Deutsche Bank are now forecasting the Fed will raise interest rates this week, driven by stronger-than-expected inflation readings.
The four institutions are aligned on a quarter-point increase at the Sept. 15-16 meeting, and several of them see rates staying higher for longer as the Fed pursues its 2% inflation target, according to Reuters.
Market odds of a hike this week stood at roughly 88% to 89%, compared with 67% to 70% before last week’s inflation data.
August inflation data came in hotter than anticipated, with a closely watched gauge of core prices notching its biggest monthly jump in four months.
Separately, crude oil crossed $100 a barrel as hostilities in the Middle East intensified, stoking fears that inflationary pressures would prove difficult to shake.
“Lack of inflation progress has tipped the balance,” HSBC economist Ryan Wang said in a note, Reuters reported.
In a note, JPMorgan economists led by Michael Feroli characterized the prior week as one featuring “rising bond yields and energy prices and a firm enough set of inflation readings to make a rate hike at next week’s FOMC meeting more likely than not,” according to Reuters. The bank also raised its estimate of the long-run policy rate to 3.25%.
Goldman Sachs published a note on Sunday maintaining its outlook for two Fed rate cuts in 2027, albeit pushed back from its earlier timeline, while framing the anticipated hike this week as a response to market dynamics rather than a signal from the underlying inflation picture, according to Reuters.
The shift marks a sharp change in Goldman Sachs’ tone. As recently as last month, the bank had called a September rate increase “very unlikely,” with chief economist Jan Hatzius arguing that two months of softer jobs and inflation data made it difficult to see any Fed members shifting toward hikes.
At that point, CME FedWatch data put the odds of a September increase at around 30%, and Goldman’s baseline pointed to further improvement in inflation rather than renewed deterioration.
The Fed entered this week’s meeting having left borrowing costs unchanged all year, following a quarter-point reduction at the end of 2025. Wednesday is the scheduled close of the two-day policy session.
