Morgan Stanley joins Goldman Sachs in 11th-hour switch to forecasting a Fed hike

Morgan Stanley late Monday revised its forecast for the Federal Open Market Committee's upcoming decision, shifting from an expectation that rates would stay unchanged to a call for a rate hike. The move follows a similar 11th-hour change from Goldman Sachs, according to the report.

The significance lies less in any single bank's view than in the timing. When major dealers adjust expectations this close to a policy meeting, it suggests the balance of incoming data and official commentary has shifted enough to make the consensus less comfortable. Rate expectations feed directly into bond yields, the dollar, and equity valuations, so a late repricing can move markets even before the Fed speaks.

What to watch: the FOMC's actual statement and any guidance on the path ahead. A hike accompanied by cautious language would tell a different story than one paired with signals of further tightening. Investors should also monitor how short-term Treasury yields and rate-sensitive sectors respond, since those reactions often reveal how much of the shift was already priced in.