Federal Reserve System — Policy Preview

Decision due: Wednesday, 29 July 2026, 14:00 EDT · Current federal funds target range: 3.50-3.75%

1. Executive summary

The FOMC is expected to hold the federal funds target range at 3.50-3.75%. The single most important driver is the hawkish tilt evident in the June minutes and reinforced by the cluster of speeches published since that meeting, in which several voting members have argued that core inflation is not on a convincing path back to target and that policy firming may be required. The key risk is an upside inflation surprise, particularly if the core PCE release on 30 July or the statement itself underscores persistent supply-shock and demand pressures from energy and artificial-intelligence-related infrastructure.

2. The call

Fed funds futures imply roughly a 66% probability of a hold at the 29 July decision, with about 34% on a 25bp hike. Surveyed economist consensus is for a hold at the level announced on 17 June. Our call is for a hold, in agreement with both the consensus and the futures pricing; the gap between the speech record and market expectations is not yet large enough to fade the latter. A shift in the call would require either a decisive further softening in the inflation trajectory or clear evidence that the labour market is deteriorating faster than the June minutes anticipated. The path since the December 2025 cut has been a steady hold through the first half of 2026; the bundle offers no evidence for an imminent reversal of that direction.

3. The committee

Warsh’s second meeting as Chair comes against the backdrop of the June minutes, which recorded that a few participants favoured an immediate hike and that almost all saw firming as likely if inflation pressures persisted. The speech record since 17 June tilts hawkish, with Logan, Waller and Cook stressing upside inflation risks and the need for higher rates, while Jefferson and Williams have placed more weight on anchored expectations and the absence of labour-cost pressure. Logan and Waller appear pivotal among voters; the recorded 12-0 hold in June does not preclude a shift in tone or a single dissent if the statement hardens. The aggregate tilt is consistent with this mild hawkish skew.

4. Data since the last decision

No new release since the last decision for: Employment cost index (QoQ), Output gap — the committee sees the same print(s) it saw last time. Market rows are measured from the 17 Jun close — the last observation common to every market series on or before the last decision.

The data since the 17 June decision are mixed but do not yet resolve the tension flagged in the minutes. Core PCE, the Committee’s target gauge, rose 0.1pp to 3.4% in May. In contrast, headline and core CPI surprised materially to the downside, with the latter falling to 2.6%. Labour-market prints were soft on quantity—nonfarm payrolls missed by 53k and industrial production slowed—yet the unemployment rate edged lower to 4.2%, average hourly earnings held steady and both business and consumer sentiment beat expectations. Activity indicators tilted firm: GDP surprised on the upside and the services PMI surged.

The outlook the Committee will set policy against therefore remains one of inflation still well above the 2% target. Core PCE at 3.4% is moving sideways to higher, not lower, while energy prices have risen 4.6% since the June close and the broad dollar is firmer. The output gap remains positive at roughly 1pp, consistent with demand running above trend. The labour market shows limited slack: unemployment near 4.2% and steady wage growth offset the weak payroll figure. A clear disagreement exists between the CPI and PCE paths; the latter is being given more weight because it is the mandated gauge and has been the Committee’s consistent reference. Inflation trajectory, not the level of activity or the precise degree of labour slack, is doing the heaviest lifting in the case for leaving policy unchanged this week but signalling that firming may still be required.

5. What the speeches say

The record since the June decision is dominated by hawkish interventions from voting members. In remarks published on 16 July Logan argued that inflation “has been too high, for too long, and does not appear to be on track all the way back to 2 percent” and that “the inflation risks are mainly to the upside”, an explicit call for modestly higher rates. The same day Schmid stated that his “primary concern is inflation, which is too hot and has been above target for too long” and that he was “uncomfortable ever assuming that a burst of inflation is likely to be temporary”. Jefferson, also published on 16 July, took the opposite side, noting that “if inflationary pressures do not intensify and inflation expectations remain well anchored, then it may be prudent to prioritize the downside risks to output and employment” and that looking through transitory shocks could be appropriate.

Cook’s remarks published on 15 July tilted firmly hawkish, stating that “the risks from high inflation concern me more at this time” and that “the balance of risks has teetered toward the inflation mandate”. Williams, published the same day, offered a more patient glide-path forecast, expecting inflation to reach around 3¼% by year-end and only land on target in 2028, while stressing that “we do not see evidence of the labor market adding to inflationary pressures”. Warsh, in testimony published 14 July, focused on the need to “put these years of high inflation behind us” and to “weigh a range of ideas for delivering price stability”, a mild hawkish framing that aligns with his reform-oriented agenda.

Waller spoke twice. In remarks published on 13 July he highlighted concern over the elevated pace of core inflation this year, which has steadily moved up from 3 percent in December 2025 to 3.4 percent in May, and argued that with inflation above target the policy rate must rise to bring it down; simply waiting for it to decline is not an option. His remarks published on 6 July revisited the 2021 experience, criticising forward guidance that “unnecessarily delayed rate increases”, and argued for flexible tools that do not hinder timely tightening. The two speeches published on 4 June by Bowman and Williams pre-date the last decision and contained negligible monetary-policy content.

Taken together the post-June record shows a majority of active speakers emphasising that inflation is sticky, that supply shocks from energy and tariffs should not be looked through, and that policy may need to firm. The most recent communications on 16 July reveal a split, yet the balance still leans toward those stressing upside risks.

6. Scenarios

7. Into the meeting

The statement is likely to remain in the sharply abbreviated form introduced in June, with emphasis on elevated inflation “in part reflecting supply shocks including energy” and the strength of demand linked to artificial-intelligence infrastructure. In the press conference the primary signals will be Warsh’s assessment of whether the balance of risks has shifted further toward inflation and any early indication of how the five task forces—especially those on inflation frameworks and balance-sheet policy—may alter the reaction function. Markets will focus on whether the statement drops residual forward-guidance language entirely and on any hint that the September SEP could show a higher median dot. The decision is taken immediately before the 30 July core PCE, GDP advance, personal income and spending releases; any surprise in those prints will colour the immediate repricing.

Full analysis on the RoboMacro site → /central-banks/FED