US Federal Reserve July 2026 Meeting: Will the Fed Raise Rates? Here Is What Markets And Experts Forecast

Economists around the world are expecting the Fed to hold rates in July primarily because of June's consumer price index data, which cooled off to 3.5% from 4.2% in May, slight relief in oil prices, and nearly full employment, but that situation can change anytime as uncertainty in the war has made oil a volatile asset.

"There is justifiable concern that the re-escalation of the Middle East conflict and the rebound in oil prices will keep inflation higher for longer. The spike in oil prices was responsible for a 20 basis point jump in expectations of cumulative Fed rate hikes by the first quarter of 2027 over the past seven days," said James Knightley, chief international economist at ING.

"The mid-term US elections are less than four months away. US President Donald Trump could quickly pivot to a position that eases some of the financial pain for the electorate. The alternative is that we see a deterioration in conditions should Houthi rebels choke off Red Sea supply to Asia from Saudi Arabia. A further tightening of global supply conditions would mean oil prices could rise towards $120/bbl. That would lead to sharply higher headline inflation. The Fed would likely respond with higher interest rates."

The ongoing war pushed Brent crude prices to touch $100 in the past few days before dropping over 6% to $92 per barrel on Monday, but there is always a risk that oil prices will continue to rise, fueled by the war in the Middle East, thus propelling inflation.

Also, a higher cost of borrowing can impact consumer spending and hurt the resilient US economy, which might force the Fed to hike interest rates sooner than expected.

Markets Bet On September Hike

Financial markets have been dilly-dallying since the start of the war on February 28, and last week, the Nasdaq Composite recorded a 745-point weekly crash, followed by the Dow Jones and S&P 500, which also plunged over 207 points and 77 points, respectively.

If the Fed keeps rates unchanged on Wednesday, that would mark the fifth consecutive meeting when the central bank has left its benchmark rate unchanged.

Money market traders now expect a 55% chance of a rate hike in the September meeting, according to the CME Group's FedWatch, which uses 30-day Fed funds futures prices to predict rate cut decisions.

The Federal Open Market Committee, the 12-member voting body that decides on interest rates, is scheduled to announce its next interest rate decision on Wednesday, July 29, at 2 p.m. ET.

The US central bank has a dual target mandate of full employment and inflation just under 2%. The core personal consumption index is the Fed's preferred gauge of inflation that it follows.

Historically, the Fed cut its target rate three times in 2024 and three more times in 2025, and Fed Chair Warsh has pledged to return inflation to 2% at the June meeting. The FOMC rate-setters voted unanimously to hold its benchmark interest rates at 3.50%-3.75% at the June meeting.

Whether the Fed stays on hold or surprises with a policy shift, its July meeting is expected to influence stock markets, bond yields, the US dollar, and investor sentiment across the globe.