Federal Reserve rate‑hike odds climb to near 50% ahead of July meeting

Bond traders have surged into bets that the Federal Reserve will raise interest rates at its July 29 meeting, pushing CME Fed funds futures volume to a record of over 500,000 contracts. The market’s probability of a 25‑basis‑point hike peaked at roughly 40% before settling around 30%, while the FedWatch tool showed the odds rising to 46.5% on June 13.

New Fed Chair Kevin Warsh, who took office in May 2026, signaled a hawkish stance at his debut FOMC meeting, with the dot plot indicating nine of 18 policymakers expecting at least one hike before year‑end. The current target range of 3.50‑3.75% could move to 3.75‑4.00% if a July hike occurs, and market pricing puts the chance of a September hike near 80%.

Geopolitical developments – notably renewed U.S. sanctions on Iran and a surge in oil prices – have heightened inflation concerns, prompting Fed Governor Christopher Waller to warn against repeating past policy delays. Upcoming CPI data will further shape expectations for the Fed’s July decision.