Fed Sets Sights on Higher Rates Ahead

The Federal Reserve's decision to raise interest rates for the first time in three years has set off a chain reaction on Wall Street, with major banks lining up behind the expectation of another hike in October.

Goldman Sachs projects a 25 basis point increase at the October 27-28 FOMC meeting, while Bank of America is even more aggressive, forecasting hikes at both the October and December meetings.

The market-implied probabilities currently put the odds of an October rate hike somewhere between 45% and 53%, with stronger odds for a hike in December, ranging from 70% to 89%.

The September decision was unanimous, with all 12 voting members backing the hike. The median year-end rate forecast sits at 4.1%, implying that rates need to go higher from here.