The Federal Reserve is expected to hike rates for the first time in three years: Live updates

While it may have taken a while, Wall Street finally has warmed to the idea that the Federal Reserve likely will raise its benchmark interest rate as it seeks to slay a maddeningly persistent inflation problem.

Traders have assigned a better than 90% probability that the central bank’s Federal Open Market Committee will vote to raise the overnight funds rate a quarter percentage point, putting the target range at 3.75%-4%, according to the CME Group’s FedWatch gauge of futures prices.

A month ago, the odds were just 36%, as the market expected soft inflation readings and Chairman Kevin Warsh‘s reluctance to commit the Fed to a hawkish policy path to keep the appetite in check for tighter monetary policy.

However, Warsh’s remarks during the Fed’s annual symposium in Jackson Hole, Wyo. started to turn the tide. Another raft of discouraging inflation data along with a firming labor market helped seal the deal. A resurgence in crude oil prices back above $100 a barrel because of the Iran conflict adds to pressures on the central bank to act.

Morgan Stanley economists reflected the broader Street sentiment. In a note Monday, the firm said it had switched its forecast from no hikes this year to two, based in part on Warsh’s public statements as well as the leg higher in oil prices, inflationary expansion in artificial intelligence and a broader shift toward expectations for hikes. The firm expects one this week, followed by another in December.

“Not doing so would risk loss of credibility and a potential rise in longer-term risk premia similar to the reaction after the July FOMC meeting,” wrote Michael Gapen, chief U.S. economist for Morgan Stanley.

If approved, the hike would be the first since July 2023. Since then, the FOMC has lowered rates six times for a total of 175 basis points, or 1.75 percentage points.

Investors also will be watching a slew of other indicators Wednesday, as the committee updates its Summary of Economic Projections. The document includes updated outlooks for unemployment, inflation and gross domestic product, as well as the dot-plot of individual participants’ expectations for interest rates. This update of the grid for the first time will include expectations for 2029.