Wall Street Flips Script: Goldman, Morgan Stanley Now See Fed Hike

Morgan Stanley became the second major bank in 24 hours to abandon its 'hold' call on the Federal Reserve, following Goldman Sachs into forecasting an interest rate increase at the upcoming FOMC meeting. The late-Monday reversal signals a rapid shift in institutional positioning ahead of the decision.

This kind of last-minute consensus change across major sell-side desks is rare and typically triggers repricing across rate-sensitive assets, from bond yields to dollar pairs. Traders should expect volatility as market makers adjust hedges to reflect the new hawkish base case.

Not everyone agrees with the pivot. Several prominent economists have publicly warned that hiking now could be a policy error, citing hidden vulnerabilities beneath current economic data that markets may be underpricing.