The odds of a Federal Reserve rate hike next week jumped to 38% on Thursday, up from 12% a week earlier, according to CME Group's FedWatch, which reads those bets from Fed funds futures prices.
Economists polled by FactSet still expect the Fed to hold its benchmark rate in a target range of 3.5% to 3.75% when the Federal Open Market Committee announces its decision on Wednesday, July 29. That would be the fifth straight meeting with no change. The bets that shifted are about what comes later this year.
Rising oil prices are the trigger the sources name. Brent crude topped $100 a barrel on Thursday, and CBS News reported that surge has some forecasters expecting higher rates by year's end rather than the cut many predicted at the start of 2026. On the September meeting, fed funds futures traders were pricing in more than an 80% chance of a hike, a jump from 52% a week earlier.
Fed officials have leaned hawkish in recent speeches. Forbes contributor Simon Moore noted that Governor Lisa Cook flagged inflation at 3.7%, above the 2% target, while Vice Chair Philip Jefferson and Governor Christopher Waller both warned they may reconsider policy if inflation doesn't cool. Chair Kevin Warsh has committed to price stability while declining to give forward guidance on future moves.
Not everyone reads the setup the same way. J.P. Morgan Wealth Management strategists argued that markets have turned too hawkish on rates and that their base case remains a Fed on hold through the end of 2026. They pointed to June's CPI, which came in weaker than expected with core inflation flat, and to a softer June jobs report showing only 57,000 jobs added.
EY-Parthenon chief economist Gregory Daco called the on-hold-through-year-end scenario "a 60-40 call" and said the September meeting will be the first real test of whether the recent inflation improvement lasts.
