16 of 20 Banks Now Expect a Fed Rate Hike

Sixteen of the 20 major Wall Street banks tracked in a rate-forecast survey now expect the Federal Reserve to hike interest rates when its policy committee meets later this month, a dramatic shift from the rate-cut expectations that dominated forecasts through much of the year.

The breakdown skews heavily toward action: three banks are calling for an aggressive 75 basis point increase, eleven are positioned for a 50 basis point move, and two expect a smaller 25 basis point hike. That leaves just four holdouts. HSBC is sticking with a hold call, Jefferies remains in the rate-cut camp, and Morgan Stanley is also among the minority, though the specifics of its call were not fully detailed alongside the other three.

The pivot lines up with a broader hardening in market pricing over recent weeks. Fed funds futures on the CME's FedWatch tool have climbed toward the mid-50% range for a September hike, up from levels near zero just months ago, while JPMorgan Wealth Management became one of the higher-profile shops to publicly back a 25 basis point increase. Goldman Sachs remains the most prominent dissenter outside the four named holdouts, calling a September hike “very unlikely” and expecting the central bank to hold through the rest of the year.

Behind the shift is inflation that has refused to cooperate. August's CPI print held at 3.4%, well above the Fed's 2% target, and the stickiness has already shown up elsewhere in the bond market — the 30-year Treasury yield spiked to a 19-year high after a hot PPI report, and the 10-year yield has been grinding toward 5% as traders brace for the decision.

A rate increase of any size would be a rare event by recent standards — the Fed has been cutting or holding for most of the past two years, and a hike this month would mark its first tightening move since the current cycle began winding down. For crypto markets, which have benefited from expectations of easier monetary policy, a confirmed hike would remove one of the tailwinds that has supported risk assets since spring. Bitcoin and altcoins tend to trade inversely to real yields, and a jump in short-term rates could tighten financial conditions just as digital-asset markets are digesting a volatile month.

The scale of the shift among forecasters — from a handful of hawks to a supermajority — suggests the debate at the Fed's meeting may center less on whether to move and more on how large a move to make. Markets will be watching the post-meeting statement and press conference for guidance on whether the 75 basis point camp gains further traction, or whether the committee opts for the more conservative 50 basis point path favored by the majority of banks now surveyed.

For now, the swing in Wall Street sentiment underscores how quickly the inflation narrative has reversed since the rate-cut expectations that were still baked into 2026 forecasts as recently as the second quarter.

The knock-on effects are already visible outside the bond market. Mortgage rates have climbed alongside the shift in Fed expectations, squeezing an already-strained housing market, and stablecoin lending desks and onchain money markets — which price their yields off the same short-term rate expectations — are likely to see borrowing costs push higher if a hike is confirmed. Tighter dollar liquidity has historically coincided with weaker performance for both equities and digital assets, since a chunk of speculative capital rotates back toward cash and short-duration Treasuries once yields on safe assets rise.

It also complicates the picture for anyone still positioned for the rate cuts that were widely expected earlier this year. Futures markets had priced in a easing cycle stretching into 2027 as recently as a few months ago; a hike this month would not just pause that cycle but reverse it, forcing traders across both traditional and crypto markets to rework portfolios built around the assumption that policy was already turning easier.