Traders price in 41 bps of Fed tightening by year-end amid rising oil-driven inflation expectations.
The Federal Reserve is expected to leave interest rates unchanged at its 29 July FOMC meeting, despite growing bets on a September hike. Markets now price in 41 bps of tightening by year-end, driven by higher oil prices and inflation concerns linked to US-Iran tensions.
The Fed is unlikely to pre-commit to a September move, prioritizing flexibility amid geopolitical risks. The Bank of England is also set to hold rates at 3.75% on 30 July, with no major policy shifts anticipated before the summer break.
Traders anticipate a 25 bps hike in September, though Fed officials may avoid signaling it explicitly this week.