Federal Reserve Unlikely to Raise Rates Despite Rising Inflation
The Federal Open Market Committee (FOMC) is expected not to raise interest rates during its July 29 meeting, despite recent signs of inflationary pressure. Although the likelihood of a rate hike had increased in the week leading up to the decision—from 12.8% to 37.9%, according to CME Group's FedWatch Tool—policymakers are likely to remain passive due to their reactive approach and lack of comprehensive data. Key factors influencing this decision include rising oil prices caused by disruptions in the Strait of Hormuz, as well as early signs of 'Trumpflation,' where inflation is driven by policy changes. However, without recent backward-looking economic indicators—such as June Core PCE—which will not be released until after the meeting concludes—the FOMC lacks sufficient evidence to justify a rate increase. Adding complexity to this decision is Fed Chair Kevin Warsh's removal of forward guidance from Federal Reserve communications. This shift has increased uncertainty for investors, who now must rely on economic data rather than policy signals when anticipating future interest rate changes.
Topics: Federal Reserve FOMC meeting inflation interest rates