Wall Street Institutions Overwhelmingly Expect Fed Rate Hike in 2026

The Federal Reserve is expected to raise interest rates by at least 50 basis points in 2026, according to 70% of Wall Street institutions. This decision comes after the August inflation report showed a slight increase in prices, which has shifted expectations from a 50-50 chance of a rate hike just weeks ago to an almost certain outcome.

The last time the Fed started a rate-hiking cycle with a 50-basis-point increase was in March 2022, and it led to a 13% decline in the S&P 500 over the next three months. The current inflation rate, driven by Trumpflation and the AI revolution, has pushed price increases beyond the central bank's tolerable boundary.

Of the 20 institutions polled, only four do not expect a rate hike this year, with 14 of the remaining 16 calling for either a 50- or 75-basis-point increase. The FOMC may have little choice but to act, given the entrenched inflation and its potential impact on the economy.