The chance that the Federal Reserve raises rates next week has climbed to 38%, up from 12% a week earlier, according to CME Group's FedWatch tool, which reads 30-day Fed funds futures. That's a jump for a meeting where economists still expect the central bank to sit still.
The Federal Open Market Committee announces its decision Wednesday, July 29, at 2 p.m. ET, followed by a press conference from Chair Kevin Warsh. Economists polled by FactSet predict the Fed holds its target range at 3.5% to 3.75%, the fifth straight meeting without a change.
Behind the rising hike odds is oil. Brent crude hit $100 a barrel Thursday for the first time since late May during a fresh round of attacks between the U.S. and Iran, and AAA reported the average U.S. gallon of gas reached $4 this week, the highest in more than a month. The same report showed initial jobless claims dropped to 187,000 in the week ended July 18, which the Labor Department said was the fewest since 1969.
Several Fed officials have leaned toward inflation. Governor Lisa Cook highlighted inflation at 3.7%, 1.7 percentage points above the 2% target, in a July 15 speech, while Vice Chair Philip Jefferson and Governor Christopher Waller both warned they could reconsider the current stance if inflation doesn't cool. Warsh has pledged to return inflation to 2% but declined to submit individual projections at the June meeting, though nearly half of policymakers said then they would support a hike later this year.
Where forecasters agree more is September. CME's FedWatch prices roughly an 82% chance of a hike at that meeting, up from below 53% a week earlier. Gregory Daco of EY-Parthenon expects the Fed to stay on hold through year-end but called it a 60-40 call.
