Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting Club
PRO
LivestreamMenuFederal Reserve Chair Kevin Warsh speaks during a news conference at Federal Reserve Headquarters on July 29, 2026 in Washington, DC. Win McNamee | Getty Images News | Getty Images
While it may have taken a while, Wall Street finally has warmed to the idea that the Federal Reserve likely will raise its benchmark interest rate as it seeks to slay a maddeningly persistent inflation problem.
Traders have assigned a better than 90% probability that the central bank’s Federal Open Market Committee will vote to raise the overnight funds rate a quarter percentage point, putting the target range at 3.75%-4%, according to the CME Group’s FedWatch gauge of futures prices.
A month ago, the odds were just 36%, as the market expected soft inflation readings and Chairman Kevin Warsh‘s reluctance to commit the Fed to a hawkish policy path to keep the appetite in check for tighter monetary policy.
However, Warsh’s remarks during the Fed’s annual symposium in Jackson Hole, Wyo. started to turn the tide. Another raft of discouraging inflation data along with a firming labor market helped seal the deal. A resurgence in crude oil prices back above $100 a barrel because of the Iran conflict adds to pressures on the central bank to act.
Morgan Stanley economists reflected the broader Street sentiment. In a note Monday, the firm said it had switched its forecast from no hikes this year to two, based in part on Warsh’s public statements as well as the leg higher in oil prices, inflationary expansion in artificial intelligence and a broader shift toward expectations for hikes. The firm expects one this week, followed by another in December.
“Not doing so would risk loss of credibility and a potential rise in longer-term risk premia similar to the reaction after the July FOMC meeting,” wrote Michael Gapen, chief U.S. economist for Morgan Stanley.
If approved, the hike would be the first since July 2023. Since then, the FOMC has lowered rates six times for a total of 175 basis points, or 1.75 percentage points.
Investors also will be watching a slew of other indicators Wednesday, as the committee updates its Summary of Economic Projections. The document includes updated outlooks for unemployment, inflation and gross domestic product, as well as the dot-plot of individual participants’ expectations for interest rates. This update of the grid for the first time will include expectations for 2029.
8 Min Ago
Fed decision looms with 10-year Treasury yield reaching 19-year high
The Fed is set to deliver its latest policy decision at 2 p.m. ET, with the consensus looking for a quarter-point rate hike from the central bank.
The move would come after the 10-year Treasury note yield scaled this week to its highest levels since 2007, as investors fear high energy prices will keep inflation elevated.
The benchmark yield hit a high of 5.041% on Tuesday. It has, however, pulled back from that mark. As of 7:38 a.m. ET, it overed around 4.96%.
Stock Chart IconStock chart icon
US10Y in 2026
— Fred Imbert
11 Min Ago
Fed hikes are rarely one and done
The Federal Reserve rarely hikes or cuts in a vacuum. The last clear example of a one-and-done hike came in March 1997, when the Fed raised rates, but then stood pat as the Asian financial crisis unfolded.
Michael Gapen, chief U.S. economist for Morgan Stanley, believes the central bank will hike Wednesday and more could be ahead.
“The first – and primary reason – is that disinflation is not fast enough to give the committee confidence that inflation will return to 2%, and within a suitable amount of time,” Gapen wrote in a note. “We based our previous no-hike Fed forecast on the assumption that inflation would show enough progress for the committee and keep them from raising rates. While we see plenty of evidence in favor of disinflation, we are not sure it is fast enough, or clear enough, to please the committee.”
