Traders See Fed on Hold for July, but September Looms
The Fed holds steady at 66¢ for July, but the September meeting is a toss-up with a 47¢ probability of a 25bps hike. The market consensus is that the Fed will pause in the near term, but the path forward is uncertain.
Key takeaways
- 01
The Fed holds steady at 66¢ for July, but the September meeting is a toss-up with a 47¢ probability of a 25bps hike.
- 02
The market consensus is that the Fed will pause in the near term, but the path forward is uncertain.
- 03
The Federal Reserve's July 2026 meeting is priced at a 66¢ probability of a 0bps hike (KXFEDDECISION-26JUL-), indicating a strong market consensus that the central bank will keep rates unchanged.
Full analysis
The Federal Reserve's July 2026 meeting is priced at a 66¢ probability of a 0bps hike (KXFEDDECISION-26JUL-), indicating a strong market consensus that the central bank will keep rates unchanged. This aligns with the market's view that inflation remains sticky but is not accelerating. However, the September meeting is where the real uncertainty lies. The probability of a 25bps hike (KXFEDDECISION-26SEP-) stands at 47¢, nearly a coin flip. This suggests that traders are hedging against the risk of re-accelerating inflation in the coming months. The market does not see a rate cut in the near term; the probability of a 25bps cut at the July meeting is a mere 1¢ (KXFEDDECISION-26JUL-). This signals that the 'higher for longer' narrative is still dominant. The key contract to watch is KXFEDDECISION-26SEP-, as any shift in its price will be the first major signal of a change in the Fed's policy trajectory. The next CPI print will be critical.
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