The Federal Reserve is widely expected to keep interest rates on hold at its July meeting Wednesday, but a sharp climb in oil prices is changing the market conversation. Investors are now ramping up bets that the central bank could deliver another rate hike before the end of the year.
Earlier this year, many economists were looking for at least one interest rate cut in 2026. That view has shifted as resurgent inflation, fueled in part by higher energy costs, has led some forecasters to brace for tighter monetary policy instead.
Fed Chair Kevin Warsh has repeatedly said the central bank is committed to bringing inflation back to its 2% target, though he has offered little guidance on where policy may go next. At the Fed’s June meeting, Warsh did not submit individual economic projections, even as nearly half of policymakers indicated they would support a rate hike later this year.
The latest pressure point is oil. Crude prices have jumped in recent weeks and moved above $100 a barrel last week, a development economists say could keep inflation elevated in the near term and complicate the Fed’s path.
“The Fed will find holding steady a harder case to make than it looked even a few weeks ago,” Nigel Green, CEO of investment firm deVere Group, said in a July 23 email.
Market-implied odds of a rate increase at Wednesday’s meeting have been moving higher, according to CME Group’s FedWatch tool, which tracks 30-day federal funds futures to gauge expectations for Fed policy decisions. The tool now puts the probability of a benchmark rate hike at the upcoming meeting at 36%.
Even so, traders still see a hold as the more likely outcome. CME FedWatch indicates the Federal Reserve is expected to leave its benchmark interest rate in the current target range of 3.5% to 3.75%.
Here’s what to know about the July Fed meeting, the latest federal funds rate decision and how experts expect policymakers to weigh inflation, oil prices and the outlook for interest rates.
What time is the Fed rate decision?
The Federal Open Market Committee, the 12-member voting body that sets rates, is scheduled to announce its next interest rate decision on Wednesday, July 29, at 2 p.m. ET.
The announcement will be followed by a press conference at 2:30 p.m. ET led by Warsh. It’s unlikely that economists and investors will gain insights into Warsh’s economic views, given that he’s vowed to share less “forward guidance,” experts say.
What will the Fed decide?
Economists polled by FactSet predict the Fed will hold interest rates steady at 3.5% to 3.75%. That would mark the fifth consecutive meeting when the central bank has left its benchmark rate unchanged.
What do experts think?
Most experts expect the Fed to remain on the sidelines at its July meeting. However, if inflation were to reignite amid escalations in the U.S.-Iran war, it could raise the probability of a rate hike later in 2026, they said.
“While a July rate hike remains highly unlikely, the September FOMC meeting could become the first meaningful test of whether the recent improvement in inflation proves durable,” Gregory Daco, the chief economist for EY-Parthenon, said in a July 22 email.
He added, “Our base case remains that the Fed will stay on hold through the rest of the year, but it’s a 60–40 call.”
Aimee Picchi
