Fed Holds Steady: No Rate Action Expected in July
The market is fully priced for a Fed hold in July, with the 'no hike' contract at 75¢ and a 25bps hike at 24¢. The probability of no cuts by year-end is also 75%, reinforcing the 'higher for longer' narrative.
Key takeaways
- 01
The market is fully priced for a Fed hold in July, with the 'no hike' contract at 75¢ and a 25bps hike at 24¢.
- 02
The probability of no cuts by year-end is also 75%, reinforcing the 'higher for longer' narrative.
- 03
The Federal Reserve's July meeting is the focal point for rate markets.
Full analysis
The Federal Reserve's July meeting is the focal point for rate markets. The KXFEDDECISION-26JUL- contract is trading at 75¢ for no change, while a 25bps hike is at 24¢. The broader rate path is clear: the KXRATECUTCOUNT-26DEC market shows a 75% probability of zero cuts by the end of 2026. This hawkish posture is supported by elevated CPI inflation (3.8%+ YoY) and strong labor market data. For traders, this means bond yields remain elevated, mortgage rates are unlikely to drop, and equities face continued headwinds from expensive valuations. A surprise cut would be a major shock, but the market sees it as a 1% probability.
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