A meeting of the Federal Open Market Committee (FOMC) of the Fed is expected on July 29, 2026, which will decide on the interest rate. A policy easing scenario is not even being considered, while there is a fairly high probability — more than 33% — that the indicator will be raised by 0.25%, according to the CME exchange forecast.
Previous Meeting and Warsh's Stance
Last time, the Fed left the interest rate unchanged, at 3.5%-3.75%. It should be noted that the probability of policy easing was low against the backdrop of high inflation in May 2026 and high oil prices.
Furthermore, the regulator's chairman, Kevin Warsh, stated that the Fed would give fewer signals and, in general, would revise its approach to policy determination. He repeated this at congressional hearings.
Warsh also emphasized that the Fed remains independent, and interest rate decisions will be made based on data, not on the wishes of U.S. President Donald Trump, who advocates for easing the course.
The question of what the regulator's decision will be on Wednesday, July 29, remains open. Inflation slowed in June. However, in early July, the U.S. and Iran resumed active hostilities, which pushed oil prices higher.
At the time of writing, the probability that the Fed will keep the rate at the current level is 66.3%, and the probability of an increase is 33.7%, according to CME data.
Expert Opinions
Proponents of Tightening
Neil Dutta, head of economic research at Renaissance Macro, believes that Warsh will be "forced" to raise the rate. He stated this in a comment for Bloomberg on July 24.
"If you have low inflation this month, then it will likely be high in the next two. Why not do it [raise the rate] now?", the publication quotes him as saying.
In his comment, Dutta cited three main factors indicating a high probability of policy tightening:
- High demand for AI, which is pushing prices upward;
- The ongoing escalation of the conflict continues to affect the energy market, with oil quotes rising;
- Tariff policy has not softened.
By the latter, Dutta likely means the new tariffs imposed by the Trump administration. They went into effect immediately after the expiration period for temporary tariffs ended.
Dutta emphasized that under current conditions, "it is wiser to raise the rate when you can, than to do it when you must." However, the expert admitted that Warsh might push through a decision to hold the rate in July, but in doing so, he would lose votes and would be forced to tighten policy later under potentially worse conditions.
Experts such as Luke Kawa, Ritesh Jain, and Mike Zaccardi agreed with him. All of them pointed out that Warsh had become a hostage to his own statements.
Another opinion adding to the likelihood of an increase is the statement by Jim Bianco, President and Macro Strategist at Bianco Research. However, his position is more cautious.
He believes that between three and seven FOMC members will vote for tightening policy in July. This is not enough for a convincing majority in favor of a rate hike.
At the same time, the expert expects the regulator to tighten its course in September 2026 with a probability of 104%.
"They cannot vote 11 to 1 at this meeting and raise rates at the next one, given that several voting members have given speeches stating that, in their opinion, the rate should be raised. This is a new Fed with 12 independent voting members. Warsh likes to say: 'Inflation is a choice.' Make a decision to do something about it," he summarized.
It is worth noting that Bianco and other experts refer to Warsh's words because market indicators essentially require him to raise the interest rate.
And Those Who Think Otherwise
However, some analysts lean towards the view that the course will remain unchanged. Among them, one can highlight, for example, James Knightley, Chief International Economist at ING.
In his opinion, the Fed will leave the rate unchanged. The main arguments: June inflation was noticeably weaker than expected, the labor market has also softened, so there is no urgent need to raise the rate now. However, Knightley believes that in September the regulator will be forced to tighten its course.
In addition, Reuters published the results of a survey of 104 experts. The majority of them were in favor of the regulator leaving the rate unchanged in July.
"There are people who expect that Warsh may tighten monetary policy relatively early in his term. We believe that he is rather buying time and trying to convince the markets of his competence, but in reality, he would prefer not to tighten interest rates," said Jeremy Schwartz, Senior US Economist at Nomura, in a comment to the publication.
At the same time, both maintaining the rate at the current level and raising it could have a negative impact on high-risk assets, including Bitcoin. We analyzed this topic in detail in a separate video.
