FX.co ★ Fed to Keep Rates Steady, but Odds of a Hike Persist

The Federal Reserve is widely expected to keep the federal funds rate unchanged at 3.50%–3.75% for a fifth consecutive meeting in July 2026. Even so, the decision is finely balanced, with markets assigning nearly a 30% probability to a rate increase. Policymakers are contending with elevated uncertainty stemming from renewed US–Iran tensions and higher oil prices, despite softer-than-expected inflation and a still-resilient labor market. US inflation slowed to 3.5% in June, its first decline in five months. Investors will be watching both the voting split—already underscoring growing divisions within the Federal Reserve—and Chair Warsh’s second press conference for signals on the likelihood of a September rate hike. Futures markets currently imply roughly a 77% probability of an increase at that meeting. Chair Warsh has repeatedly stressed that restoring price stability remains the Federal Reserve’s top priority.