A week ago, the odds of a Fed rate hike next Wednesday looked like a rounding error. Now they don't.
The CME Group's FedWatch tool, which reads 30-day Fed funds futures to gauge rate probabilities, put the chance of a July hike at 38%, up from 12% a week earlier. The Motley Fool's Sean Williams cited a similar jump, from 10.7% on July 15 to 34.7% by July 22. Oil topped $100 a barrel on Thursday.
The Federal Open Market Committee meets July 28-29 and announces its decision Wednesday at 2 p.m. ET, with a Warsh press conference at 2:30. Economists polled by FactSet still expect the Fed to hold its benchmark rate at 3.5% to 3.75%, which would be the fifth straight meeting without a change. At the June meeting, Warsh declined to submit individual economic projections, though nearly half of policymakers said they would support a hike later this year.
Three Fed officials have warned in recent speeches that rates may need to rise if inflation doesn't cool. Governor Lisa Cook said on July 15 that the Fed's target price index rose 3.7% in the 12 months through June, 1.7 percentage points above the 2% goal, and that inflation risks concern her more than employment right now. Vice Chair Philip Jefferson said on July 16 it could be appropriate to reconsider the current stance if inflation doesn't slow. Governor Christopher Waller made a similar point on July 13.
Forbes contributor Simon Moore wrote that fixed income markets see two hikes as the most likely path for 2026, possibly starting in September or October rather than July, with continued energy-price increases as the wildcard that could pull action forward.
EY-Parthenon chief economist Gregory Daco said in a July 22 email that a July hike remains highly unlikely and that September will be the first real test of whether inflation improvement lasts. His base case is a hold through year-end, which he called a 60-40 call.
