Major banks moved toward a Federal Reserve rate-hike forecast on Monday, with Goldman Sachs, JPMorgan, HSBC and Deutsche Bank expecting policymakers to raise the federal funds rate by a quarter percentage point at their September 15-16 meeting after hotter inflation readings and another surge in energy prices changed the market calculus.

The shift represents a notable reversal in Wall Street expectations. Reuters reported that Goldman Sachs abandoned its previous forecast for unchanged rates and now expects a 25-basis-point increase. JPMorgan is forecasting quarter-point hikes in both September and December, while HSBC and Deutsche Bank also expect a September increase. The calls amount to economic forecasts rather than a coordinated appeal for the Fed to tighten policy.

The Federal Open Market Committee enters the meeting with its target rate at 3.50% to 3.75%, after leaving rates unchanged at its July meeting. A quarter-point increase would lift that range to 3.75% to 4.00%. The Fed is scheduled to release its policy decision Wednesday afternoon, followed by a press conference. The September meeting also includes updated economic projections, giving investors a new view of how policymakers see inflation, growth and the future path of rates.

Recent inflation data provided the immediate trigger for the more hawkish bank forecasts. The Bureau of Labor Statistics said the Consumer Price Index rose a seasonally adjusted 0.4% in August after a 0.1% increase in July. Consumer prices were 3.4% higher than a year earlier, unchanged from July’s annual pace. Core inflation, excluding food and energy, rose 0.3% for the month and 2.4% over 12 months.

Energy was a significant contributor. Gasoline prices increased 3.9% in August, accounting for more than one-third of the monthly rise in the overall CPI, while the broader energy index climbed 2.1%. Those figures were followed by additional upward pressure in global oil markets as conflict in the Middle East disrupted supply routes. On Monday, Brent crude rose to about $107 a barrel after approaching $110 earlier in the session, according to the Associated Press.

Producer prices have added to the concern that inflationary pressure could continue moving through corporate supply chains. The Producer Price Index for final demand increased 0.4% in August, the Labor Department reported, while the index was up 5.4% from a year earlier. Prices for final-demand goods jumped 1.1% during the month, compared with a 0.1% increase for services. For companies, sustained increases in input costs can create a choice between absorbing narrower margins or passing more costs to customers.

Financial markets have already imposed some of the tightening that a higher policy rate would reinforce. The yield on the 10-year U.S. Treasury briefly touched 5% Monday for the first time since 2023 before easing back toward 4.95%, according to the Associated Press. The move reflects a mix of inflation concerns, higher energy costs and broader worries about long-term borrowing needs. Rising Treasury yields can lift financing costs across the economy even before the Fed changes its overnight benchmark rate.

That matters directly for the business sector. Higher benchmark yields can raise the cost of issuing corporate debt, reduce the attractiveness of leveraged acquisitions and pressure valuations for stocks whose expected earnings lie far in the future. Smaller businesses can also face tougher bank-lending conditions, while households may see higher mortgage, auto-loan and other credit costs. The AP reported that the rise in long-term yields has already contributed to the highest average long-term mortgage rate in more than 14 months.

Goldman’s forecast change does not necessarily mean its economists see a fundamentally different long-term inflation path. Reuters reported that the bank described its revised September call as being driven more by market pricing than by a large change in its economic outlook. Goldman still expects two rate cuts in 2027, though later than it previously anticipated. That nuance illustrates the difficulty facing policymakers: a near-term hike could coexist with an expectation that inflation will eventually cool enough to permit easing next year.

JPMorgan’s outlook is more explicitly focused on the risk that the disinflation process has lost momentum. The bank now expects both a September and a December increase, according to Reuters. HSBC also cited insufficient progress on inflation in backing a September hike. Taken together, the forecasts show how rapidly the debate has moved from whether the Fed could remain on hold to whether one increase will be enough.

Market pricing has shifted in the same direction. Reuters reported that investors were assigning roughly a 90% probability to a quarter-point September increase, up from about 70% before the latest inflation data. Such pricing can become important in its own right because an unexpected decision creates the potential for abrupt moves in bonds, stocks and currencies. Goldman specifically pointed to the extent of market expectations in explaining why it now sees a hike as the most likely outcome.

The Fed still has reasons to distinguish between persistent inflation and price increases caused by temporary supply disruptions. Higher oil prices can lift headline inflation while simultaneously weakening household purchasing power and raising corporate costs, meaning tighter monetary policy cannot directly repair disrupted energy supplies. Policymakers must therefore judge whether the energy shock is beginning to affect wages, broader prices and inflation expectations strongly enough to justify additional restraint.

For U.S. companies and investors, Wednesday’s decision will matter beyond the size of any single rate move. Guidance on whether policymakers see September as a one-off response or the beginning of a renewed tightening cycle could determine the next move in Treasury yields, credit spreads, mortgage rates and equity valuations. With major banks now converging on a hike and markets already pricing one in, attention is shifting from whether the Fed tightens to what it signals about the months ahead.