The Federal Open Market Committee convened Tuesday for the first day of its two-day July policy meeting, the fifth of eight scheduled gatherings in 2026, with a rate decision due Wednesday at 2 p.m. ET followed by a press conference roughly 30 minutes later. It marks the second meeting under Chair Kevin Warsh, who was confirmed to the role in May after President Trump nominated him in late January to succeed Jerome Powell, whose term as chair expired on May 15.
Economists polled ahead of the meeting broadly expect the Fed to hold its benchmark rate steady in the current 3.5% to 3.75% range, which would mark a fifth consecutive meeting without a change. But the probability of a surprise move has been creeping higher in recent sessions, according to CME Group's FedWatch tool, which derives odds from 30-day Fed funds futures pricing. Some trading desks have gone as far as flagging the risk of an outright hike, a scenario that would have seemed remote just weeks ago.
Warsh has deliberately offered fewer clues than his predecessor about his intentions, having pledged to provide less forward guidance and to let the committee's internal debate, which he has described as a healthy family fight, play out more visibly. At the Fed's June meeting, his first as chair, Warsh declined to submit individual economic projections, and the minutes released July 8 revealed a committee sharply divided: roughly half of policymakers who submitted forecasts favored holding or cutting rates by year-end, while the other half argued for one or more hikes given persistently elevated inflation.
The inflation backdrop has grown more complicated in the weeks leading into this meeting. Oil prices briefly topped $100 a barrel amid the U.S.-Iran military escalation, feeding concerns that energy-driven cost pressures could keep inflation stubborn even as underlying price growth moderates elsewhere. Speaking at the ECB Forum in Sintra on July 1, Warsh reiterated that prices remain too high relative to the Fed's 2% target, even as he acknowledged growing optimism within the committee that artificial intelligence-driven productivity gains could eventually ease inflationary pressure from the supply side.
Ironically, some of that energy-driven inflation risk may already be fading. Oil prices have dropped sharply over the past two trading sessions after President Trump signaled the U.S. and Iran were engaged in serious diplomatic talks following a pause in American airstrikes, unwinding much of the geopolitical risk premium that had been built into crude prices. Whether that de-escalation registers with the committee in time to influence Wednesday's statement remains an open question, given the meeting's data cutoff.
Labor market data has also cooled modestly, with private payroll growth in recent readings coming in below consensus forecasts, giving doves on the committee some ammunition even as hawks point to sticky core inflation. Treasury yields have been broadly rising into the meeting, with the 2-year yield hovering elevated as traders position for the possibility that Warsh charts a genuinely different course than the Powell-era Fed. For equity markets already digesting a volatile earnings season and a sharp semiconductor selloff, Wednesday's decision and press conference carry outsized potential to move rate-sensitive sectors, from regional banks to real estate to long-duration technology names, regardless of which way the committee ultimately leans.