Federal Reserve Opens Two-Day Meeting With a July Rate Hike Not Ruled Out

The Federal Reserve opened its two-day policy meeting on July 28, with a decision due the following afternoon and Chair Kevin Warsh set to hold a press conference afterward. The current target range for the federal funds rate is 3.50% to 3.75%, and most economists expect no change, though futures markets have priced in roughly a one-in-three chance of a hike at this meeting. The debate is unusually open because Warsh has moved away from offering forward guidance, leaving investors reliant on the policy statement, the vote split and his remarks. Cooler-than-expected June inflation readings give the Fed room to wait, but with inflation having run above the 2% target for an extended stretch and energy prices climbing during July amid Middle East tensions, several officials have signalled a willingness to tighten. Market pricing points to a stronger chance of a move in September, and fixed-income markets broadly expect higher rates by year-end. Because this meeting does not include updated economic projections or a new interest-rate dot plot, attention will centre on any shift in tone about the path ahead.