1. Goldman Sachs: Expects the Fed to pause rate hikes in October and raise rates by 25 basis points in December. If the FOMC continues its alternating pace of rate hikes throughout 2027, it may consider another rate hike in March. However, our baseline forecast does not anticipate a March rate hike, as inflation trends are expected to improve.
2. Citigroup: Expects the Fed to pause rate hikes in October and raise rates by 25 basis points in December. However, if continued weakness in the stock market leads to a sharp tightening of financial conditions, the likelihood of the Fed shifting to rate cuts will increase significantly.
3. Moody's: The Fed will not raise rates again at its meeting this week, nor should it. The US economy is facing increasing risks, and the Fed's mistakes are one of them. The bond market is a reason why the Fed does not need to rush to tighten financial conditions.
4. Credit Agricole: Expects the Fed to pause rate hikes in October and raise rates by 25 basis points in December. The mainstream opinion among policymakers is to maintain interest rates unchanged; while current inflation data has widened the policy divide, it has not yet reached the threshold forcing the Fed to act immediately in October. 5. Nomura Securities: Expects the Fed to keep interest rates unchanged in October. Dovish statements from officials, emerging credit pressures, and the approaching midterm elections all contribute to this pause in rate hikes. The Fed is guiding the market to anticipate a pause in rate hikes in October, while retaining ample policy flexibility for a resumption of rate hikes in December.
6. TD Securities: Expects the Fed to keep interest rates unchanged in October. The possibility of an unexpected rate hike is higher than normal, but we believe the committee will prioritize patience and wait until December to act. Holding rates steady in October makes a December rate hike more likely. We expect the Fed to raise rates twice more, in December and March.
7. Huatai Securities: Recent economic data has been mixed, but most Fed members have indicated they do not favor consecutive rate hikes, and financial conditions have tightened somewhat. We expect the October meeting to keep interest rates unchanged, with perhaps two hawkish voting members dissenting. In the baseline scenario, the Fed will raise rates once more in December this year and twice next year.
8. Morgan Stanley: We expect the Fed to keep rates unchanged in October while signaling to the market that further tightening is still possible. We expect the Fed to raise rates by 25 basis points in December and March next year, with overall risks still skewed towards additional tightening.
9. BNY Mellon: We expect the Fed to pause rate hikes in October and raise rates by 25 basis points in December. We expect rates to peak slightly above 4.5% rather than rise steadily at each meeting, implying approximately three more rate hikes by this time next year.
10. Bank of America: The Fed has ample reason to raise rates in October. If it holds rates steady in October, the Fed will only retain the option of a one-time rate hike; if it raises rates in October, it will retain the flexibility to continue raising rates in December, making the rate hike cycle more aligned with expectations of rate cuts in 2024 and 2025. Given the more threatening inflation data, the latter option is more strategically valuable.
(Note: Bank of America is one of the few, if not the only, major investment banks that still expect an October rate hike.)
