Fed Appears Set To Raise Rates In July, But Here Are The Details That Matter

Markets have high confidence that the Federal Reserve will raise rates 0.25-percentage-points at their next interest rate decision on July 26. The Fed suggested this during their June decision, which held rates steady. The June economic projections signaled a base case of two more hikes from the four remaining Fed meetings of 2023. In addition, the June statement explicitly referenced “additional policy firming” and during his press conference Jerome Powell offhandedly referred to the June decision as a “skip”, perhaps implying that the June decision was a pause between hikes rather than a more fundamental change in direction for interest rates.

In a speech on July 13, Fed Governor Christopher Waller clearly spelled out the Fed’s likely actions saying. “I see two more 25-basis-point hikes in the target range over the four remaining meetings this year as necessary to keep inflation moving toward our target.” Importantly, this speech right came after June’s CPI data, which showed more evidence of disinflation, but apparently that hasn’t changed the Fed’s resolve at this point. So the case for an interest rate hike at the July meeting appears relatively clear.