Fed Rate Hike Bets Soar as Oil Prices Hit $100

Goldman Sachs and JPMorgan have revised their forecasts on the US Federal Reserve's interest rate decision. The two banks now expect a 25-basis-point hike this week, following stronger-than-expected inflation data and a sharp rise in oil prices.

The change in forecasts comes after US consumer and producer prices rose more than expected in August, raising concerns that progress towards the Fed's 2% inflation target could stall. Oil prices above $100 a barrel have added to inflation risks, with markets now pricing an approximately 87% probability of a hike for September.

Earlier forecasts had focused on the possibility of rate cuts, but stronger employment and inflation data have pushed several Wall Street institutions towards a tighter policy outlook. JPMorgan now expects another 25-basis-point increase in December and has raised its estimate for the Fed's longer-run policy rate to 3.25%.