Wall Street has converged on the same call heading into the Federal Reserve’s September 15-16 meeting: a quarter-point hike on Wednesday.
Goldman Sachs, J.P. Morgan, HSBC and Deutsche Bank are all now forecasting an increase, a sharp turn from the earlier consensus that had the Fed sitting still through 2026.
Inflation data flips the consensus
August consumer and producer prices both came in hotter than expected, while oil pushed above $100 a barrel as hostilities in the Middle East flared again.
HSBC economist Ryan Wang backed a September hike in a note:
“Lack of inflation progress has tipped the balance.”
Markets now price roughly a 90% chance of a quarter-point move, up from about 70% before the data, with another hike expected in December, and J.P. Morgan has lifted its long-run policy rate estimate to 3.25%.
The press conference is the real event
Robin Brooks argued that the 2 pm ET statement and dot plot matter far less than what Chair Kevin Warsh says half an hour later.
Brooks wrote:
“A hike is a foregone conclusion. Markets price a 25 basis point hike with 90 percent probability and it’s inconceivable that the Fed doesn’t follow through.”
With two hikes priced for this year and two more for 2027, Warsh has little room to sound dovish without reopening the argument over Fed credibility.
Dollar positioning and the debasement trade
CFTC data through September 8 showed markets heavily long the dollar, a position Brooks expects has grown since the CPI surprise.
A messy press conference, he said, could send the dollar lower even on a hike day and revive the debasement trade.
Brooks added:
“This Fed hike won’t be materially negative for gold and other precious metals because it’s happening to cap long-end yields.”
Goldman Sachs, for its part, reads the hike as driven more by market pricing than by inflation fundamentals.
