On the eve of the Federal Reserve's decision, Wall Street bets on a "hawkish pause": Nearly a 30% probability to guard against a surprise rate hike

BlockBeats News, July 29th - The Federal Reserve will announce its interest rate decision on July 29th, Eastern Time (early morning on July 30th, Beijing Time), marking one of the most challenging FOMC meetings in recent years. According to CME FedWatch, traders currently estimate a 71% probability that the Fed will maintain the interest rate in the 3.50%-3.75% range, while still betting around 29% probability of a 25 basis point unexpected rate hike.

The main uncertainty in this round comes from oil prices and inflation. The fluctuating Middle East situation has repeatedly pushed up energy prices, causing market concerns about a resurgence of inflationary pressure. At the same time, recent inflation data has shown signs of cooling, making it even more difficult to price in whether the Fed needs to take immediate action.

Wall Street generally believes that even if the Fed stands pat this week, Chair Jerome Powell may still signal a hawkish stance. Investors will focus on three key points: whether the statement strengthens inflation risks, whether there are dissenting votes in support of a rate hike, and whether Powell leaves room for further rate hikes later this year.

For the market, the real risk lies in a revision of the interest rate path. If the Fed hints at more tightening possibilities, U.S. bond yields and mortgage rates may continue to rise, growth stocks and other rate-sensitive assets will face valuation pressure. Strategists say that on decision day, U.S. stocks may experience significant volatility, as investors are waiting for Powell to provide a clearer policy direction.