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Rising inflation risks turning late-July Fed meeting into a rate-hike call
Markets are pricing a 30.0% to 40.0% chance of at least one additional Fed hike before year-end amid fresh energy price pressure and new tariff uncertainty.
Yahoo Finance says the Federal Reserve's July 28-29 meeting has shifted from expectations of a rate hold to a more contested setup as inflation concerns reemerge. Economists and traders had expected the FOMC to pause, citing a stabilizing labor market, a drop in oil prices, and a dip in the June Consumer Price Index.
The article points to higher energy costs following a recent escalation related to Iran, noting that gas prices rose and Treasury yields hit new highs. It also cites tariff developments from the Trump administration, which on July 24 released new tariffs of between 10.0% and 12.5% against 60 countries for alleged forced labor practices, described as a workaround following a Supreme Court ruling earlier this year.
According to Yahoo Finance, former Yale economist William English said there is a case for either raising rates or not, and that Fed watchers are essentially “stuck.” The piece also includes remarks attributed to Fed Chairman Kevin Warsh from the Fed’s twice-yearly Monetary Policy Report to Congress in mid-July, emphasizing that longer-run underlying inflation is largely shaped by monetary policy.
The article adds that the 30-year Treasury rate is around 5.18%, its highest level in nearly two decades. It also says markets assign a 30.0% to 40.0% probability that the Fed will need to hike at least once before year-end.