Fed rate decision due Wednesday; analysts' base case is a hold with a hawkish tone

The US Federal Reserve decides on interest rates on Wednesday, 29 July 2026, corresponding to 7 Mordad 1405. According to Reuters, analysts' base case is a hold accompanied by a hawkish tone, and at the time of the report the market priced only about a one-third probability of a rate increase at this meeting. The central banks of Japan and the United Kingdom also meet this week.

Reuters columnists Mike Dolan and Jamie McGeever wrote in two separate pieces that returning inflation to the 2 percent target will probably not be possible without raising rates again. US core inflation is running around 3 percent, above target. Kevin Warsh, who took over as Fed chair from Jerome Powell two months ago, told Congress two weeks ago that 63 consecutive months of above-target inflation has acted like a tax on American households and companies.

According to those reports, several price pressures have become active at once: higher energy and food prices, import tariffs, a memory chip shortage and a tight labour market. Weekly US jobless claims have fallen to their lowest since 1969, and oil has risen by as much as 40 percent from its early July trough. The Fed's June projections do not expect inflation to return to target before 2028, and the 50 basis points of cuts included in the March projections were removed in June. Bank of America economists have warned that a hold could erase the market's current expectation of roughly 60 basis points of increases over the coming year.