News Flash: 70% of Wall Street Institutions Are Calling for at Least a 50-Basis-Point Fed Rate Hike in 2026

Today, Sept. 16, is the day all of Wall Street has been waiting for. In mere hours, at 2 p.m. ET, Fed Chair Kevin Warsh and the Federal Open Market Committee (FOMC) will announce what, if any, monetary policy changes have been made to the federal funds target rate -- and that answer is expected to cause wild vacillations in the Dow Jones Industrial Average (DJINDICES:^DJI), S&P 500 (SNPINDEX:^GSPC), and Nasdaq Composite (NASDAQINDEX:^IXIC).

Over the last few weeks, the odds of a Fed rate hike have hovered around 50-50, both on prediction markets and for the CME Group 's (NASDAQ:CME) proprietary FedWatch Tool. But there's been a decisive shift in expectations following the release of the August inflation report .

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All eyes are on Fed Chair Warsh and the FOMC. Image source: Official Federal Reserve Photo.

Since Kevin Warsh became Fed chair nearly four months ago, he's instituted several reforms, none of which have gained more notoriety than removing forward-looking guidance from FOMC meeting statements. Unfortunately, this lack of transparency that the equity and bond markets had become accustomed to for more than two decades has made it considerably more challenging to decipher what the central bank will do next.

While a few Wall Street institutions and economists altered their take on the FOMC's Sept. 16 meeting after Warsh's Jackson Hole speech on Aug. 28, we witnessed a monstrous shift in thinking after the August inflation report was released.

According to calls aggregated by The Wall Street Journal and published on X (formerly Twitter) by Nick Timiraos, its chief economics correspondent, only four of 20 institutions don't expect a rate hike this year, and 14 of the 16 that do are calling for a 50- or 75-basis-point increase to the federal funds target rate in 2026.

As a reminder, the last time the Fed kicked off a rate-hiking cycle with a 50-basis-point increase was in March 2022, which was followed by a 13% decline in the benchmark S&P 500 over the next three months.

Trumpflation and the AI revolution may force the Fed into action

Although a rate hike is bound to draw the ire of President Donald Trump, who's been advocating for lower interest rates since his second term began, Warsh and the FOMC may have little choice if they want to deliver price stability.