#加密市场观察 July FOMC preview: Are rate hikes near or far?

On July 28 and 29, the Federal Reserve will hold an FOMC meeting in the U.S. East time zone, and the rate decision will be released at 2:00 a.m. Beijing time on July 30. Affected by the turbulent situation in the Middle East, the risk of a rebound in inflation has recently risen, which may also make this policy meeting a core focal point for funds this week.

First segment: Market outlook expectations— Referring to the CME Fed Watch forward-looking data
FedWatch is a free tool launched by the CME Group. It uses interest-rate futures trading data to calculate the probability of rate changes. By observing this data, we can usually understand how market funds are betting on the Federal Reserve’s rate path.
CME Fed Watch July rate-hike probability: Currently, the U.S. federal funds rate is maintained in the 3.5%-3.75% range. Based on current market pricing, the probability that this meeting raises the rate to 3.75%-4% (a 25bp hike) is 37.9%, and the market’s expectation for a rate hike remains on a modest upward trend.

Second segment: The biggest change! The interpretation logic in the Wo(h) and Powell eras is completely different
During Powell’s previous chairmanship, he was used to releasing guiding signals and was willing to hint to the market, so people could infer a rough timeline for the future path of interest rates.
But after the new chair, W(h), took office, the way he communicates has clearly changed: he deliberately stays cautious, refuses to provide advance predictions of the future rate path, and is also unwilling to clearly map out a rate route. Overall, policy adjustments now flexibly follow economic data. Therefore, for W(h)’s remarks at the July meeting press conference, we should no longer try to “pick apart” hints like “in which month rate cuts will happen, in which month rate hikes will happen, and how future rates will move.” Instead, we should focus on the following directions: ① How W(h) assesses current inflation pressure;
② His stance on the current U.S. employment situation and economic resilience;
③ His thinking on future Federal Reserve reforms and the current progress.
A list of W(h)’s recently stated views (July 15— Senate hearing):
"I’m not satisfied with any inflation indicator."
"The labor market looks quite good, but inflation is not very optimistic."
"We will review our tools, including the balance sheet and interest rates, to see whether we need to adjust them to deal with inflation."
"That inflation has remained consistently above the 2% target for the past five years is itself a failure of the Federal Reserve, and we must have zero tolerance for persistently high inflation."
"Tools to rein in inflation include interest rate tools, and we have the ability to do this."......

Third segment: Locking in inflation— U.S. June PCE data
PCE is the Federal Reserve’s core inflation gauge. The latest data for this round will be released on the night of the 30th at the same time. Another inflation observation indicator, June CPI, has also shown a downward trend due to prior adjustments in oil prices.
U.S. June core PCE price index month-over-month: prior value 0.3%, expectation 0.2%, actual ? (released at 20:30 on July 30)