US Interest Rate Prep [29th July]

On Wednesday, the 29th of July at 14:00 ET, the FOMC concludes it’s 2 day meeting and announces the latest US Rate Decision, alongside the US Rate Statement.
Here are some views on what to expect.

Overview
At this meeting, analyst consensus expects rates to remain unchanged at 3.75%.
As of the start of this week, market pricing implies a 66% chance of no change at this meeting, with roughly a 33% chance of a hike.

What to Expect
US Stocks
Equities will focus on whether the Fed’s statement and Warsh’s comments lean more dovish or hawkish. Any indication that policymakers are becoming more confident in the inflation outlook could support stocks, particularly growth and technology sectors. Conversely, a more cautious tone that emphasizes lingering inflation risks may weigh on equities by reinforcing expectations that policy will remain restrictive for longer.
US Dollar
The dollar would likely strengthen if the Fed signals that it is in no rush to ease policy or highlights persistent inflation pressures. A more balanced or dovish tone that acknowledges further progress on inflation could pressure the dollar as markets increase expectations for future rate cuts.
US Government Bond Yields
Treasury yields, particularly at the front end of the curve, will be driven by changes in the Fed’s guidance. A hawkish statement or press conference would likely push yields higher, while a more dovish message could pull yields lower as investors price a more accommodative policy path.
Federal Reserve Policy
Without an SEP or dot plot, markets will focus primarily on:
Any changes to the policy statement, particularly around inflation, labour market conditions, and the balance of risks.
Whether Chair Warsh signals greater confidence that inflation is moving sustainably toward 2%.
Any hints about the conditions that would justify future policy easing.
The July meeting is therefore likely to be judged less by the interest rate decision itself and more by whether the Fed’s communication shifts expectations toward a higher-for-longer stance or a more accommodative policy path.

Commentary
Goldman Sachs
Market pricing implies roughly a 40% chance of a hike, making either a hike or a hold an unusually large surprise by historical standards. The uncertainty reflects Chairman Warsh’s different approach, ambiguity around his own preference, recent divisions within the FOMC, and renewed Iran escalation during the blackout period.

Even so, most voters appear unlikely to support a hike after softer June inflation data, particularly at a meeting without a Summary of Economic Projections, where a surprise move could lead markets to infer a broader tightening cycle. Despite the rebound in oil, the effects of tariffs, the war and AI on monthly inflation are still expected to fade, leaving core inflation soft enough for the Fed to remain on hold through year-end.

Wells Fargo
Kevin Warsh’s second meeting as FOMC Chair is expected to result in another hold, with the Committee waiting for more data before deciding whether its hawkish bias is justified. Employment and inflation have both come in softer than expected since the last meeting, supporting patience, although the recent rise in oil prices keeps the inflation risks alive. At least two hawkish dissents are likely, most probably from Lorie Logan and Beth Hammack.

With no updated SEP and Warsh favouring a “less is more” communication style, the statement and press conference are unlikely to deliver major new signals. He is expected to stress that policy is well positioned to await further information and that the Committee remains committed to its inflation target. The key focus will be any indication of what would trigger a hike, particularly through the next few inflation reports, while the base case remains for rates to stay on hold as core inflation gradually slows.

Previous Release
Kevin Warsh’s first meeting as Fed chair left rates unchanged but marked a clear shift in tone and communication. The statement was sharply shortened, forward guidance was effectively dropped, and Warsh declined to submit his own SEP projections, arguing that the dot plot is not especially useful for policy. Even without his dot, the projections remained firm: half of participants appeared to expect at least one hike this year, although none believed tightening was needed at this meeting.

The broader message was one of hawkish patience. Warsh stressed that inflation remains above target, that the Fed must prevent volatile price shocks from creating wider second-round effects, and that restoring inflation credibility remains central. At the same time, he described growth as solid and the labour market as stable. The meeting also pointed to a wider institutional overhaul, with reviews of communications, the balance sheet, data, productivity and inflation frameworks, reinforcing the shift toward a more stripped-down, less guidance-heavy Fed.

The market reaction was hawkish, and it responded mainly to the vote split in the SEP, with over half of the FOMC expecting a rate hike at some point this year.