July Fed Meeting: A Likely Pause, But What Comes Next?
Market expectations for the Federal Reserve's upcoming July policy meeting have crystallized, according to the latest data from the CME FedWatch Tool. A clear majority of traders are betting on the central bank taking a breather from its tightening campaign.
The July Call: A High-Probability Hold
The data shows a 73.3% probability that the Fed will leave interest rates unchanged in July. This suggests policymakers are highly likely to "skip" a rate hike at this meeting following a long series of increases. The market still sees a chance for a modest move, pricing in a 26.7% probability of a 25-basis-point hike.
The Forward View: Uncertainty Clouds the September Path
Looking ahead to the September meeting, however, the market's expectations become significantly more fragmented:
- A 32.4% probability rates remain unchanged: Some investors anticipate the pause could extend beyond July.
- A 52.7% probability of a cumulative 25-bps hike: This is the prevailing scenario—a July skip followed by a final hike in September.
- A 14.9% probability of a cumulative 50-bps hike: This reflects lingering concerns that stubborn inflation could force the Fed to accelerate tightening again.
This divergence underscores that while the immediate July decision appears straightforward, questions about whether the hiking cycle is truly over and the pace of future policy remain wide open. Upcoming inflation prints, labor market data, and banking sector conditions will be critical in shaping the decision for September.