Key Highlights
- Major Wall Street banks have shifted to more hawkish rate forecasts following the Federal Reserve’s September 25 basis point hike, with the median analyst prediction now pointing to one additional 25 basis point increase.
- Forecasts are split on timing: NatWest, Swedbank, and Goldman Sachs see an October hike, while Standard Chartered and Commerzbank target December; Morgan Stanley projects two more hikes by Q1 2027.
- A notable divide persists: ING, SEB, and Citi maintain the September move was the cycle peak, while JPMorgan, Barclays, UBS, and others expect only 25 basis points more, versus 50 basis points from Bank of America, Deutsche Bank, and others.
Wall Street Recalibrates Fed Rate Path After September Meeting
The Federal Reserve’s September policy meeting, which delivered a widely anticipated 25 basis point rate increase, has triggered a broad reassessment across Wall Street’s leading financial institutions. Analysts at Goldman Sachs, Morgan Stanley, NatWest, Rabobank, Swedbank, and Commerzbank have all shifted their forward guidance in a more hawkish direction, reflecting the central bank’s signaling that inflation remains sticky enough to warrant further tightening. While the consensus has coalesced around at least one more rate hike, the dispersion in timing and terminal rate expectations underscores deep uncertainty about the trajectory of monetary policy into 2024 and beyond.
Divergent Timing: October Versus December for Next Move
The most immediate point of contention among strategists is the calendar. NatWest and Swedbank have penciled in a 25 basis point increase for the Federal Open Market Committee’s October gathering, a view now shared by Goldman Sachs, which also pushed out its projected rate cuts to September and December 2027 and March 2028. Standard Chartered and Commerzbank, by contrast, have slotted their additional hike into the December meeting. Morgan Stanley stands out with a more aggressive call, forecasting a cumulative 50 basis points of further tightening—two quarter-point moves—by the first quarter of 2027. The median of analyst predictions compiled across the Street aligns with a single 25 basis point increase from current levels, but the range of projected meeting dates spans October through December.
Terminal Rate Split: 25 Versus 50 Basis Points of Additional Tightening
Beyond timing, firms are divided on the total magnitude of remaining hikes. A cohort including ANZ, Bank of America, RBC, TD Securities, BNP Paribas, Deutsche Bank, Morgan Stanley, and Société Générale anticipates a full 50 basis points of additional tightening. Another group—JPMorgan Chase, Barclays, UBS, Goldman Sachs, and Standard Chartered—sees the cycle ending after just 25 more basis points. On the dovish fringe, ING, SEB, and Citigroup argue the September increase marked the terminal rate, projecting no further hikes in the near term. This fragmentation has eroded the previously dominant “one-and-done” narrative, shifting market focus squarely onto whether the next move arrives in October or December.
Why This Matters
The recalibration of Wall Street’s rate forecasts carries direct implications for asset allocation, corporate financing costs, and global capital flows. A higher-for-longer rate environment pressures equity valuations, particularly in rate-sensitive sectors like real estate and utilities, while supporting the U.S. dollar and lifting yields across the Treasury curve. For businesses, the widened spread between the 25 and 50 basis point camps translates into material uncertainty around the cost of capital for 2024 investment planning. Policymakers at the Fed will closely monitor financial conditions indices as they weigh the lagged effects of 525 basis points of cumulative tightening since March 2022 against resilient labor markets and persistent core inflation. The next Critical Consumer Price Index and employment reports ahead of the November 1 FOMC meeting will likely determine whether the October hike scenario gains traction or the December camp prevails.
Frequently Asked Questions
- What is the current median Wall Street forecast for additional Fed rate hikes?
- The median analyst prediction points to one more 25 basis point increase from current levels, though institutions are split between October and December for the timing.
- Which major banks believe the Fed has already finished hiking rates?
- ING, SEB, and Citigroup maintain that the September 25 basis point hike was the final move in the current tightening cycle and do not expect another increase in the near future.
- How have Goldman Sachs and Morgan Stanley updated their rate projections?
- Goldman Sachs now expects a 25 basis point hike in October and has delayed its forecast for rate cuts to late 2027 and early 2028. Morgan Stanley projects two additional 25 basis point hikes totaling 50 basis points by the first quarter of 2027.
