Big Banks Expect Fed to Raise Rates Tomorrow

Goldman Sachs, JPMorgan Chase, Bank of America and Morgan Stanley expect the Federal Reserve to raise its policy rate at the Federal Open Market Committee meeting in Washington tomorrow. Futures markets show a high probability of an increase ahead of the announcement.

The banks pointed to persistent inflation above the Fed’s 2 percent target, a tight labor market and recent Fed guidance as reasons for their expectations. Analysts at the firms note price growth has slowed from peak levels but remains above the long-term objective, and wage gains continue to support consumer spending.

A higher federal funds rate would raise the cost of overnight borrowing between banks and influence interest rates across the economy, including mortgages, auto loans and corporate debt. Market participants will focus on the Fed’s policy statement and the chair’s press conference for signals on the timing of any further policy moves.

The Federal Open Market Committee meets about every six weeks and bases decisions on data for inflation, employment and output. Since 2022 the Fed has raised rates multiple times in response to elevated inflation; officials have emphasized that future changes will depend on incoming data.

Goldman Sachs, JPMorgan Chase, Bank of America and Morgan Stanley publish regular economic outlooks that feed into their policy expectations. Other large financial firms and traders using similar data have reached comparable forecasts ahead of the meeting.