After the ECB, it is Kevin Warsh’s Federal Reserve that must deliver the big announcement on US rates.
Will rates be left unchanged once again, or will they be raised, with Warsh having repeatedly stressed the need to bring US inflation back to the 2% target?
The FOMC meeting, July 28–29: here we are
The market’s answer looks clear, even though over Wall Street’s most recent sessions the probability of a rate hike at this imminent July 28–29 meeting has risen.
According to the CME Group’s FedWatch tool, which is based on the pricing of 30-day fed funds futures contracts, the probability of a rate hike has climbed to 34.3%, up from 12% two weeks ago.
The increase reflects the winds of war in the Middle East, which have picked up again after the renewed conflict between the United States and Iran and the collapse of the truce between the two sides.
In any case, the higher probability remains that of fed funds staying put in the 3.5%–3.75% range, for the fifth consecutive time.
The July 29 decision: Kevin Warsh’s Fed and US rates
The rate announcement is expected at 8:00 p.m. Italian time (2:00 p.m. ET) today, Wednesday, July 29, 2026, at the close of the two-day meeting of the FOMC (Federal Open Market Committee), which began on Tuesday, July 28.
At 8:30 p.m. Italian time, Federal Reserve Chair Kevin Warsh will open the press conference — his second, after his “debut” at the June 17 meeting — taking questions from reporters.
His most recent remarks, including those delivered in Sintra (at the ECB’s — European Central Bank’s — annual central banking forum in Portugal), sent investors more than one message: inflation — “the inflation tax,” as he calls it — remains the challenge the US central bank must win, though under Warsh the Fed wants less and less “forward guidance.”
The end of forward guidance? Gregory Daco’s “significant paradox”
Several economists and market watchers have spoken about the end of forward guidance, among them Gregory Daco, chief economist at EY-Parthenon and president of the NABE (National Association for Business Economics), one of the most prominent and widely cited economists in the world on US macroeconomics and Federal Reserve policy.
In his post titled «Less Guidance, More Discretion: The Warsh Fed Takes Shape», Daco wrote that Warsh has
“signaled a preference for less frequent use of press conferences, arguing that they are an important communication tool that should nonetheless be used sparingly, and above all when there is genuinely relevant news to convey.”
Daco went on to add that “the Chair’s preference for more measured communication was evident.”
On forward guidance specifically, the EY-Parthenon chief economist recalled, “Warsh stated that excessive interplay between the Federal Reserve’s communication and financial markets can prove counterproductive,” and that “his preference is for markets to infer the likely path of monetary policy on the basis of incoming economic data.”
In practice, for the head of the US central bank, Daco noted, “the prices of financial instruments represent ’the most important source of information’ available to central banks.”
Daco also pointed to what he called a “significant paradox”: the fact that “Warsh has repeatedly reaffirmed the importance of restoring and maintaining price stability” while “largely avoiding questions about the Federal Reserve’s reaction function — that is, how the central bank intends to respond to evolving macroeconomic data.”
There is more. The impression is that the Fed Chair has “downplayed the level of disagreement within the FOMC, despite the evident split between members who favor tighter policy and those inclined toward a more patient approach.”
What markets are pricing and what economists are betting on
That said, given the incoming macro data, what can be expected from Warsh’s Fed — not only today, but across all of 2026?
Daco, again, told CBS News that if inflation were to reignite in the wake of the US-Iran war, the probability of a rate hike could rise later in 2026:
«Although a rate hike in July remains highly unlikely, the September FOMC meeting could become the first significant test of how durable the improvement in inflation really is.»
His base case for now remains a Fed that stays on hold through the end of the year. But, he added, «we assign this scenario a 60% probability against 40% for the alternative.»
Everything, then, could change from one moment to the next, at a time when it is Middle East tensions that are dictating the course of inflation.
The crucial question is what might happen to US fed funds rates following the imminent FOMC meeting.
A recent Reuters article reported that markets are pricing two rate hikes by the end of March 2027, fearing an inflation rate the Fed will keep struggling to rein in and, above all, to bring back to the 2% target. All 104 economists polled by Reuters also said they expect Warsh to leave fed funds unchanged today.
Among them, however, three-quarters — 78 — said they believe rates will then be left untouched through the end of the year.
It should be noted, though, that compared with the survey a month earlier, the shift is that among those forecasting a change in rates, economists projecting at least one hike during 2026 now prevail, while only six still expect cuts.
Moreover, the majority of economists who answered a separate question on the possibility of a rate hike during 2026 described the probability as “high” — the opposite of last month, when the probability of tightening had been called “low.”
Goldman Sachs: the oil rebound clouds the near-term inflation picture
Indeed, as Goldman Sachs’s research division noted in a report published today, “oil prices have rebounded 35% from their early-month lows to $97 a barrel, calling into question what until recently looked like a very favorable near-term scenario for inflation.”
At the same time, the analysts added that “we nonetheless continue to expect contained increases in core inflation in July and August.”
Looking ahead over the near term, Goldman Sachs forecasts a month-on-month rise in the core CPI (Consumer Price Index) of 0.21% in July and 0.23% in August, for a year-on-year inflation reading of 3.05% — still, however, well above the 2% target the Fed is aiming for.
The same survey showed expectations for the US unemployment rate at around 4.2%, while GDP growth is seen averaging 2% — estimates that confirm there is no particular obstacle making it difficult for Warsh to raise rates in order to bring inflation back into line.
Editor’s note
This article was originally published in Italian on money.it by Laura Naka Antonelli on July 27, 2026 as «Previsioni riunione Fed 29 luglio. La scelta di Warsh sui tassi USA secondo gli analisti». It has been translated and adapted for an international audience by the Money.it International desk.
