All 104 economists in a mid-July Reuters poll expect the Federal Reserve to hold its main rate at 3.50%-3.75% on Wednesday, yet fed funds futures put the chance of an increase near 36%. Brent crude above $100 and new US import taxes have already pushed the two-year Treasury yield above the Fed's own ceiling.
Every one of the 104 economists Reuters surveyed in mid-July said the Fed will leave its main rate between 3.50% and 3.75% at Wednesday's decision. Traders are less certain: fed funds futures put the chance of a rise near 36%, up from 13% a week ago.
Economists name one outcome, futures price them all
The Fed's main rate has sat between 3.50% and 3.75% for four meetings, and the FactSet consensus says it stays there. Of the 104 economists polled, 78 expected no change through December.
Those two camps are not really arguing, because economists name the single likeliest outcome while futures price every outcome, including the unlikely ones. The FOMC meets July 28-29. Polymarket is pricing roughly 20% odds for a 25 basis point hike at that meeting. A rate hike would be the Fed's first since July 2023.
Oil and tariffs revived the inflation problem
Brent crude closed at $100.69 on July 23, its first close above $100 since May 26. Prices are up over 30% this month, and costlier oil means costlier fuel, which lifts inflation.
Tariffs came next. On Friday the US added new import taxes of 10% and 12.5% on goods from 60 trading partners, replacing tariffs the Supreme Court threw out in February under a law that is harder to challenge.
Bond markets are braced already
The 10-year Treasury yield closed Friday at 4.69%, its highest since January 2025. The two-year is the real tell: it ended the week at 4.33%, above the Fed's own 3.75% ceiling.
However, Chair Kevin Warsh has stopped hinting at what comes next, and the Fed will not publish new forecasts either. Warsh said forward guidance is absent and that it was "not well suited to the current policy conjuncture".
Gregory Daco of EY-Parthenon calls a July hike unlikely, yet puts the rest of the year at 60-40. Warsh speaks 30 minutes after the decision, and with forecasters and traders this far apart, the tone there will matter more than the vote.
Sources: BeInCrypto, Crypto Briefing
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