Bank of America calls it “unprecedented,” while Deutsche Bank bets on “two votes against”—this evening’s Fed, with the market pricing an “out-of-rules” decision

What does a 30.5% rate-hike probability mean?

Based on the script from the past 30 years—it means it’s “impossible.”

Bank of America combed through all data since 1994 and reached a conclusion: the Fed has never raised rates when the market-implied probability of a rate hike was below 60%.

60% is that invisible red line. 30.5%? Not even half the line.

But tonight, the entire market is taking this 30.5% seriously.

Citi says this is “the biggest moment of disagreement since September 2024.” JPMorgan says it’s “the hardest to predict in recent years.”

A thing that should be “impossible” is now being priced by Wall Street as “possible.”

What does this indicate?

It indicates that this time is truly different.

Where is it different? Two lines.

The first line: historical convention is broken.

A month ago, the market was nearly certain that rates would stay put in July. In June, CPI came in below expectations, falling to 3.5%, and core CPI year-over-year dropped to 2.6%—everything pointed to “wait.”

But then three things happened:

First, the U.S.-Iran ceasefire fell apart, and Brent crude surged above $100. Since the June meeting, oil prices are up 25%.

Second, Trump announced new tariffs of 10% to 12.5% on 60 countries.

Third, AI investment has remained strong, driving growth in related demand.

With these three factors stacking together, the probability of a rate hike in July jumped from 10% to 30%.

One data point took the market from “certain” to “anxious.”

The second line: cracks within the Fed.

Deutsche Securities predicts: even if rates are kept unchanged, Hamarck and Logan would cast two votes against, supporting a rate hike.

What do two votes against mean?

It means the “keep unchanged” outcome itself is a hawkish signal.

It means the Fed is no longer speaking with a single voice, and internal disagreements have been made public.

And the biggest variable is the person sitting in the chair—the one as Chairman: Kevin Wosh.

He did something that past Fed chairs haven’t even dared to imagine in the past decade:

He scrapped “forward guidance.”

Previously, the Fed would tell you in advance “what we plan to do.” The market would have direction, expectations, and a sense of security.

Wosh didn’t do that. He said: every meeting is a real decision meeting, and I won’t tell you the answer ahead of time.

So what happened?

The market lost its compass.

Goldman Sachs says investors believe the July meeting outcome has “abnormally high uncertainty.” Nick Timiraos, the “Fed’s megaphone,” directly said: even he can’t figure it out.

A Fed in which even the “megaphone” fails—is this still the Fed we know?

At 2:00 a.m. tonight, there are four possibilities.

Scenario A: keep unchanged + mild wording (highest probability, about 50%)

Short-term dovish. But don’t get too excited—Wosh’s press conference could revise things at any time.

Scenario B: keep unchanged + two votes against (probability about 28%)

On the surface it stays unchanged, but it’s hawkish in substance. The two dissenting votes by Hamarck and Logan will tell the market that a rate hike is just one breath away.

Scenario C: an unexpected 25bp rate hike (probability about 20%)

A huge jolt in the short term. JPMorgan predicts the S&P 500 would fall 1.5%-2%, and the Nasdaq 100’s downside could roughly double.

But don’t just stare at the stock market. Bank of America says that if there’s a rate hike in July, it would be “unprecedented”—it would bring forward 2026’s rate-hike expectations from 45 basis points to 60 basis points, while “establishing Wosh’s credibility on independence and anti-inflation.”

Put into plain language: this rate hike is laying the groundwork for more rate hikes in the future.

Scenario D: keep unchanged + Wosh’s vague guidance (lowest probability, but the most torturous)

Because there is no forward guidance, the market will fall into a guessing game.

Every word will be over-interpreted. Every sentence will be chewed over again and again.

In the end, three truths—

First, the outcome of this decision may not be that important.

What matters is the wording. Whether the statement deletes “patience.” What Wosh says—and doesn’t say—at the press conference.

In the rebuilding of the framework, every word has pricing power.

Second, the Fed is no longer the kind of Fed that “won’t surprise the market.”

In the past, the average error between the implied fed-funds futures rate and the final policy rate was only 2.4 basis points. This time, the error could be measured in “bps.”

What Wosh wants is precisely this uncertainty. He wants the market to relearn how to “guess.”

Third, no matter what happens tonight—

The probability of a rate hike before September is close to 100%.

Haitong Securities has already said: in the baseline scenario, the probability of Wosh hiking before September is close to 100%.

Tonight is just the appetizer. The main course is in September. #USD1持币生息最高8% #长鑫开盘跌7.7% #Strategy首次回购STRC $BTC $ETH $XAU