Markets now price a 35% chance of a July Fed hike after oil-driven inflation concerns, up from 10% earlier.
Markets have repriced the probability of a July Federal Reserve rate hike to 35% from 10% following a rebound in oil prices and renewed inflation worries. Analysts expect the Fed to hold rates steady but warn that the USD’s path hinges on communication clarity.
A hawkish hold could extend tightening expectations without altering the roughly 55 basis points of cumulative hikes priced through mid-2027, supporting the USD. Conversely, a poorly explained pause risks undermining Fed credibility, lifting inflation breakevens and pressuring the currency.
The shift reflects growing concerns that persistent inflation may delay policy easing, with oil prices amplifying near-term risks.