Goldman Sachs, however, believes that the economic justification for aggressive monetary tightening is limited. According to the bank, a significant portion of the above-target inflation trend stems from factors expected to lose their impact over time. Therefore, it is suggested that some members of the Federal Open Market Committee may be hesitant to explicitly signal further interest rate increases in the coming period.
UBS expects the Fed to raise interest rates at both its September and December meetings. While the bank anticipates that Michelle Bowman and Christopher Waller may vote against the September decision, it forecasts a median interest rate of 3.9% for the end of 2026 and 2027. Wells Fargo’s main scenario is for two separate 25 basis point rate hikes in the coming months. However, the bank also notes that a “one-and-one” scenario, where the Fed raises rates only once and then waits, is also among the possibilities.
However, a view contrary to market expectations emerged from the cryptocurrency sector. Bitwise consultant Jeff Park said that despite markets pricing in an interest rate hike with approximately 90% probability, he believes Fed Chairman Kevin Warsh will ultimately decide not to change interest rates. Park argued that keeping rates unchanged is more likely given Warsh’s assessments of his monetary policy approach and the current economic outlook. While acknowledging that his prediction could be wrong, Park pointed out that because market positioning is largely focused on an interest rate hike scenario, a surprise decision to keep rates unchanged could lead to asymmetrical and strong price movements in the markets.
At its July meeting, the Fed left the policy interest rate unchanged, but three FOMC members voted for a 25 basis point rate hike. Therefore, investors will focus today not only on the rate decision itself, but also on the vote count, the updated “dot plot” projections, and Warsh’s message regarding the remainder of the year. In particular, whether the median projection points to a second rate hike in 2026 will be crucial in determining whether markets view today’s potential Fed move as a one-off adjustment or the beginning of a new tightening cycle.
*This is not investment advice.
