Federal Reserve Rate Cut Odds Drop to Zero for July 2026
Markets are pricing in a zero percent chance of a Federal Reserve rate cut at the July 29 meeting, according to CME FedWatch data. Instead, traders see a 25 percent chance of a quarter-point rate hike, driven by inflation that hit a three-year high of 4.2 percent in May. New Fed Chair Kevin Warsh has signaled the central bank is focused on bringing inflation back to its 2 percent target.
The probability of a Federal Reserve interest rate cut at the July 29 meeting has fallen to zero, according to data from the CME FedWatch Tool. Futures markets now show a 74.9 percent chance the Fed holds rates steady at 3.50 to 3.75 percent, with a 25.1 percent chance of a quarter-point hike.
The shift reflects persistent inflation. The Consumer Price Index rose 4.2 percent year-over-year in May, the highest reading in three years. Energy costs, driven partly by geopolitical conflict, accounted for more than 60 percent of the monthly price increase.
New Federal Reserve Chair Kevin Warsh, who took over from Jerome Powell earlier this year, updated the Fed's projections at the June meeting. The median forecast now points to a year-end 2026 rate of 3.8 percent, up from 3.4 percent in March. Nine of 18 Fed officials project at least one rate hike before the end of the year.
Goldman Sachs has pushed its forecast for rate cuts to 2027, citing the combination of sticky inflation and a resilient labor market. The economy added 57,000 jobs in June, and the unemployment rate held at 4.2 percent.
For consumers, the outlook means high-yield savings accounts remain attractive. Top online banks are offering rates above 4 percent annually, well above the national average of 0.38 percent. Variable-rate debt, including credit cards and home equity lines, will likely remain expensive.
Financial advisors are urging borrowers to prioritize paying down high-interest debt rather than waiting for rate relief. Balance transfer cards offering zero percent APR for up to 21 months are one option for managing credit card balances while rates stay elevated.
