Fed Expected to Hike Rates for First Time in Three Years

Morgan Stanley's global head of macro strategy, Matt Hornbach, expects a 25 basis-point rate hike at the Federal Reserve's September FOMC meeting.

This would be the first rate increase since July 2023, a three-year stretch during which the Fed held rates steady and markets were pricing in cuts.

August inflation data landed harder than economists expected, resetting the table quickly. A Reuters poll found 85% of economists now predict the Fed will lift its benchmark target range to 3.75%-4.00%, up from the current level.

Futures contracts are pricing in an 87% to 90% probability of a quarter-point hike, and several strategists at major banks, including Goldman Sachs and J.P. Morgan, have updated their forecasts to include the September hike.