Fed set to hold rates steady as markets price in July uncertainty
What's next: Traders still see roughly a 40% chance of a quarter-point hike, with many shifting attention to a possible September move.
The Federal Reserve is widely expected to leave interest rates unchanged at its July meeting, even as oil volatility and renewed tensions with Iran keep pressure on the inflation outlook. CNBC reported that annual consumer inflation slowed to 3.5% in June after an unexpected monthly decline, but higher energy prices have complicated the picture for Fed Chairman Kevin Warsh. Citigroup traders are betting on a hold with “high conviction,” while swap markets still imply nearly a 40% chance of a 25-basis-point increase this week. The split underscores how unsettled expectations have become as investors weigh softer inflation data against rising Treasury yields and the risk that energy costs could feed back into prices.