Federal Reserve Expected to Hold Rates at July 29 Meeting
Futures markets show a 0 percent chance the Federal Reserve will cut interest rates at its July 29 meeting, with a 25 percent chance of a quarter-point hike instead. Inflation running at 4.2 percent annually and a steady job market have pushed the Fed away from the rate cuts many investors expected at the start of 2026.
The Federal Reserve is almost certain to leave interest rates unchanged at its July 29 meeting, and markets are now pricing in a real chance of a hike before the year ends.
The CME FedWatch Tool shows a 0 percent probability of a rate cut at the July meeting. The odds favor rates holding steady at 3.50 to 3.75 percent, with a 74.9 percent probability. A quarter-point hike carries 25.1 percent odds. Nobody in the futures market is betting on a cut.
That marks a sharp reversal from the start of 2026, when many investors expected the Fed to continue the rate-cutting cycle that began in 2025.
Inflation is the main reason for the shift. The Consumer Price Index rose 4.2 percent year over year in May 2026. The Fed's preferred gauge, the Personal Consumption Expenditures index, came in at 4.1 percent, with a core reading of 3.4 percent. Both sit well above the Fed's 2 percent target.
The labor market has stayed resilient. June's jobs report showed employers added 57,000 positions, and unemployment ticked down to 4.2 percent. That combination of sticky inflation and a solid job market gives the Fed room to stay cautious.
New Fed Chair Kevin Warsh ran his first meeting on June 17. The Fed's updated projections raised the median year-end 2026 rate forecast to 3.8 percent, up from 3.4 percent in March. Nine of 18 officials now project at least one hike this year.
For savers, the environment remains favorable. High-yield savings accounts at top online banks are paying around 4.00 to 4.10 percent APY, far above the national average of 0.38 percent. Certificates of deposit are less attractive because locking in a rate only makes sense if rates are about to fall, and they are not.
For borrowers, the picture is harder. Credit card APRs are likely to stay elevated or climb. Variable-rate debt gets more expensive the longer the Fed holds off on cuts. Financial advisors are recommending that consumers with credit card balances prioritize paying them down rather than waiting for relief from rate cuts.
