- The Federal Reserve is expected to raise interest rates by 25 basis points on Wednesday, with CME’s FedWatch tool putting odds at 94.5%.
- A Wall Street Journal survey found nearly every major bank expects the hike, with most forecasting 50 basis points of total tightening in 2026.
- The move sets up a political clash with President Trump, who handpicked Fed Chair Kevin Warsh hoping for lower rates and has pressured him not to hike.
Wall Street is bracing for the Federal Reserve to raise interest rates for the first time since 2023, with an expected quarter-point hike on Wednesday. The Federal Open Market Committee wraps up its two-day meeting, and CME’s FedWatch tool puts the odds at 94.5%, up from under 50% a month ago.
The shift from unlikely to near-universal happened fast. A Wall Street Journal survey found nearly every major bank now expects a hike, with Barclays, Citigroup, JPMorgan, Morgan Stanley and UBS forecasting 50 basis points of total tightening by year-end. Bank of America, Deutsche Bank and RBC are more hawkish, calling for 75 basis points.
Higher rates make borrowing more expensive, slowing spending and hurting assets like stocks and Bitcoin. It also makes safe government bonds pay better, pulling cash out of riskier bets. The hike lands two months before the November midterms, where voters are already frustrated with high prices.
The case for a hike rests on inflation that won’t cooperate, with headline CPI at 3.4% annually in August. Oil prices, pushed higher by the ongoing conflict with Iran, have added a layer of price pressure.
The hike puts Fed Chair Kevin Warsh in an uncomfortable spot, as President Trump handpicked him for the job in January expecting lower rates. According to reports, Trump, Vice President JD Vance, and Treasury Secretary Scott Bessent have all publicly pushed for cuts in the past two weeks.
Bitcoin is walking into the decision already bruised, trading around $75,700, down about 3.2% after the Clarity Act failed its Senate cloture vote. Bitcoin is now well off its September peak near $82,000. The Fed’s statement and updated dot plot are due at 2 p.m. ET Wednesday, followed by Warsh’s press conference at 2:30 p.m. ET.
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