July Fed Hike Odds Rebound to 34% as June CPI Drop Fades After Oil Spike

3 articles · Updated · The Motley Fool · Jul 25

July 22 pricing put the odds of a Federal Reserve rate hike at about 34%, rebounding after traders had cut them to 16% and then 12% following June inflation data.
A 0.4% month-on-month drop in headline CPI and flat core CPI initially convinced markets that tightening was unnecessary, even as Chair Kevin Warsh told Congress the Fed had "no tolerance" for elevated inflation.
That view shifted as investors concluded June's inflation relief was driven largely by cheaper gasoline during a temporary U.S.-Iran truce, not broad-based disinflation.
Brent crude and gasoline prices jumped again after the truce ruptured in early July, reviving concern that energy costs could reaccelerate inflation before the July 28-29 Fed meeting.
Warsh has struck a hawkish tone since taking office, leaving markets to expect a hike later this year even if the Fed holds rates steady in July.