Matt Hornbach, Morgan Stanley’s global head of macro strategy, expects a 25 basis-point rate hike when the Federal Open Market Committee meets on September 15-16. This would mark the first rate increase since July 2023, breaking more than three years of rate stability. August inflation data, which came in harder than expected, triggered a sharp shift in Wall Street consensus: 85% of economists polled by Reuters now forecast the Fed to lift its benchmark target range to 3.75%-4.00%, while futures contracts price in an 87% to 90% probability. Goldman Sachs and J.P. Morgan have also updated their forecasts accordingly. If the Fed hikes and the dot plot signals another increase likely, longer-dated Treasury yields could reprice higher, pushing up borrowing costs for mortgages, corporate debt, and consumer credit, with real estate and utilities most exposed.
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