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Fed holds rates steady in July, markets price a September hike

HSBC strategists say upcoming US labor and core CPI releases could raise volatility and shift expectations on whether a September move is pushed back.

Reported · Written up by our desk · Central Banks

HSBC strategists, cited by FXStreet, said the Federal Reserve left policy rates unchanged in July as expected, while markets now assign about a two-thirds probability to a rate hike in September.

They emphasized the Fed Chair’s data dependent stance, arguing that upcoming US macro releases and inflation prints will likely become more influential. The strategists pointed to labour market cooling and subdued core CPI as factors that could lead investors to reassess the timing of any further increase.

The note also highlighted that payrolls and CPI data are scheduled close to the September meeting, raising the risk that the decision could narrow to the wire. HSBC added that any additional cooling in the summer could prompt investors to consider pushing back a hike.

FXStreet’s wider context referenced that unpredictable developments in the Middle East could further affect the outlook, and that forward guidance could be harder to rely on if risks shift quickly.

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