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Markets weigh whether Fed will hold rates amid oil shock risks
CME FedWatch shows a 70.6% odds of a steady hold at 350 to 375 basis points, with a 29.4% probability of a 25 basis point hike.
The Federal Open Market Committee’s two-day meeting opened Tuesday and runs through Wednesday, July 29, when the Fed will deliver its interest rate decision and a press conference, with Kevin Warsh presiding for only his second meeting as chair, according to Yahoo Finance and TheStreet Neo.
Markets are split because two forces are pulling policy expectations in opposite directions. June’s inflation report showed prices cooling to 3.5% from 4.2% in May, supporting a steady-rate view, while renewed U.S.-Iran tensions and a breakdown of an earlier ceasefire have lifted oil prices, raising concerns that higher energy costs could feed into broader inflation.
CME Group’s FedWatch tool currently prices in a 70.6% probability that the Fed holds rates steady in the 350 to 375 basis point range, versus a 29.4% chance of a 25 basis point hike. The implied odds have moved over the past month, edging toward a slightly higher likelihood of a hold, but the uncertainty remains.
Warsh has also signaled a shift in how the Fed communicates, intending to provide significantly less forward guidance than his predecessors, a change that has unsettled some market participants. Yahoo Finance and TheStreet Neo also cite Santiment Intelligence data showing uncertainty is appearing in trader conversation leading into the July 28-29 FOMC decision.