Global banks coalesce around Fed hike call after inflation surprises

By Rashika Singh

Sept 14 (Reuters) - A ‌growing number of ​brokerages expect ​the Federal Reserve to raise rates this week after stronger-than-expected inflation readings raised doubts that price pressures would ease without further tightening.

Goldman Sachs, J.P.Morgan, ‌HSBC and Deutsche Bank forecast a quarter-point hike at the Fed's ⁠September 15-16 meeting, with several expecting rates to stay higher for longer to bring inflation back to its ‌2% target.

The shift follows data ‌showing U.S. consumer and producer prices rose more than expected in August, while oil prices climbed above $100 a barrel amid renewed hostilities in the Middle East, raising concerns ​that inflation pressures could remain elevated.[O/R]

The growing hawkishness marks a sharp turnaround from earlier this year, when many economists expected the Fed to remain on hold after ⁠keeping rates unchanged throughout 2026 following a quarter-point cut in December 2025.

"Lack of inflation progress has tipped the balance," ​HSBC economist Ryan Wang said in a note, backing a September rate hike.

J.P. Morgan struck a similarly hawkish tone following the inflation reports.

"The ​week that saw rising bond yields and energy ‌prices and a firm enough set of inflation readings to make a rate hike at next week's FOMC meeting more likely than ⁠not," J.P. Morgan economists led by Michael Feroli said in a note.

The outlook for further Fed tightening will be in focus this week as policymakers conclude their meeting on Wednesday, while investors also ⁠watch the Bank of Japan for policy signals.

J.P. Morgan said the latest inflation data cast doubt ​on a sustained disinflation trend, leading it to forecast another Fed rate hike this year and raise its estimate of the long-run policy rate to 3.25%.

Markets are pricing in about 90% chance of ‌a quarter-point Fed rate hike this month, up from about 70% before the latest inflation data, with another increase expected in December, ‌according to CME's FedWatch Tool.

In a separate note on Sunday, Goldman Sachs said it still expects ⁠two Fed rate cuts in 2027, ‌though later than previously ​forecast, as it sees this week's expected hike as driven more by market pricing than inflation fundamentals.

(Reporting by Rashika Singh in Bengaluru; Editing by ‌Sherry Jacob-Phillips)

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