TLDR
- Markets now price in an 87% chance of a Fed quarter-point rate hike at the September 15-16 meeting
- Goldman Sachs and J.P. Morgan both flipped to expecting a hike after stronger-than-expected August inflation data
- Oil prices have risen 37% in two months, topping $100 a barrel, pushing gas to $4.30 a gallon
- The S&P 500 rose Friday but faces headwinds from rising Treasury yields and crude prices
- Consumer sentiment fell to 47.8 in September, near its lowest point of the year
Wall Street is now almost certain the Federal Reserve will raise interest rates at its September 15-16 policy meeting. Markets put the odds at 87%, up from around 70% before last week’s inflation data came in hotter than expected.
JUST IN 🚨: The odds of a rate hike next week have soared to 86% 🤯 👀 pic.twitter.com/u5GmM9LCdY
— Barchart (@Barchart) September 11, 2026
Goldman Sachs dropped its previous call for rates to stay unchanged. The bank now expects a 25-basis-point hike this week. J.P. Morgan went further, forecasting quarter-point increases in both September and December.
The shift came after data showed U.S. consumer and producer prices rose more than expected in August. The Fed has held rates steady all year after a small cut last December.
Fed Chair Kevin Warsh has been clear about the goal: get inflation back to the central bank’s 2% annual target. Economists say the latest data make that harder without more tightening.
“Underlying inflationary pressures continue to be sticky and the Fed will have to hike,” said Jeff Schulze, head investment strategist at Franklin Templeton Institute.
Oil Prices Add Pressure on Consumers and Markets
A big part of the inflation story is oil. Crude prices have climbed about 37% over the past two months due to ongoing hostilities in the Middle East. Brent futures briefly pulled back to $104.50 on Friday after reports of possible peace talks among Gulf states, but oil has held above $100 a barrel for three straight sessions.
Gas prices hit $4.30 a gallon on Friday, up nearly 35% from last year. Diesel crossed $6 a gallon for the first time ever.
Those energy costs are feeding into broader inflation readings and are expected to keep doing so in the months ahead.
Consumer sentiment is reflecting the strain. The University of Michigan’s September reading dropped to 47.8, down nearly 4 points from August and close to the lowest level of the year.
The 10-year Treasury yield pulled back slightly on Friday but had been testing the 5% level, last seen in 2023. It closed at 4.97%.
The S&P 500 gained more than 65 points by Friday’s close, trimming a rough week. But analysts say the market still faces real pressure from rising yields, high energy prices, and uncertainty around AI spending.
The next earnings season starts October 13 when JPMorgan reports. Wall Street expects collective S&P 500 earnings of $768.7 billion for the third quarter, up nearly 30% from last year.
Goldman Sachs still expects two Fed rate cuts in 2027, though later than previously forecast. It sees this week’s likely hike as driven more by market pricing than by inflation fundamentals alone.
J.P. Morgan raised its estimate of the long-run policy rate to 3.25%, citing doubts that the recent downtrend in inflation would hold.
How the Fed frames Wednesday’s decision may matter as much as the hike itself.
“If the Fed presents it as insurance against renewed inflation rather than the beginning of a prolonged hiking cycle, markets could interpret it as a ‘dovish hike,'” said Bret Kenwell, U.S. investment analyst at eToro.
With the November elections two months away and oil still above $100, pressure on both policymakers and consumers is not letting up soon.
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