July 2026 FOMC Preview (Public)

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Takeaway:

• Our base case for the July meeting is for a hold, with two dissents in favor of a July hike from Hammack and Logan. Other FOMC members are coming around to the idea of a hike, but aren't feeling as urgent about it.
• We expect the Committee to try to put some tightening bias into the statement, but exactly how will need to be negotiated with Warsh's opposition to forward guidance. A modification of June's statement to include something along the lines of "The Committee is prepared to act in order to deliver price stability" could satisfy the rest of the Committee while still giving Warsh plausible deniability around not doing forward guidance.
• With the relatively favorable inflation data from the June report, we don't see a hike as likely, but the Committee will want to try to set things up for a potential hike later this year.
  • Hammack and Logan have made it clear that they think policy is insufficiently restrictive right now.
  • The remainder of the Committee ranges between thinking that a hike may be warranted soon if inflation doesn't come down (e.g. Waller), to those who see just an extended hold (e.g. Williams and Daly).
  • The next hawkish voting member would be Kashkari, who penciled in one hike this year. With the inflation data coming in soft for June, we think he will be satisfied with holding this meeting.
• Going forward, our base case is for two hikes to begin in September.
  • Despite the soft-ish June inflation data, we anticipate hot prints to continue for the next couple of months, due to airfares pressure, remaining pass-through from the oil price shock, and food away from home services. We expect some payback from June's softness in accommodations inflation. Renewed inflationary threats from the Hormuz re-closure and tariffs bolster this case.
  • We see a one-in-four probability of repeated softer core PCE readings (say, 16 bp monthly over the next couple of months) allowing the Committee to hold. This could happen through softness in lodging inflation, airfares inflation ending soon, and PCE inflation revisions reducing past readings.
  • We see a one-in-five probability of continued inflation pressure into the Fall pushing the Committee to three hikes, driven by persistent passthrough of oil prices and elevated food away from home inflation.
• One less-likely, but possible path forward is for the Fed to hike once this Fall to allow Warsh to establish some semblance of "tough on inflation" credentials, before holding again.

Latest Fedspeak and Dot Projections

With Warsh declining to do forward guidance, other members of the Committee, especially Waller, are driving the bus. We've heard from enough of the core swing voting members over the past few weeks to take the temperature of the Committee.

The hawks have become more forthright, with Logan and Hammack now explicitly calling out current rates as insufficiently high. We expect to see more open dissent from this side of the FOMC.

The bulk of the Committee is represented by the likes of Waller, Jefferson and Cook. These board members don't feel as urgent of a need to hike, but are hinting that they will be soon if the inflation picture doesn't improve soon.

Key recent Fedspeak:

• Waller: "I will need to see several months of lower readings to feel that inflation is moving in the right direction... I would then continue to hold the policy rate at its current target range... if we get another hot reading on core inflation this week [meaning June data], then the FOMC will need to consider tightening monetary policy in the near term."
• Jefferson: "in a scenario where actual inflation does not start to cool down soon, I believe that it could be appropriate to reconsider our current policy stance"
• Cook: "If we do not see signs of disinflation soon, I am prepared to act... this commitment is unwavering"
• Goolsbee, on the June inflation print: "You never want to make too much hay out of any one number"
• Logan: "I currently believe modestly higher interest rates would better balance the outlook and risks for the FOMC's dual mandate goals"
• Williams: "There are encouraging reasons to expect that inflation has peaked and should edge down in coming quarters"

How the Data Have Evolved Since the Last Meeting

Data was relatively light between the June and July meeting, with only one month of inflation data and one jobs report. The combination of these two is enough to stave off a July hike, but the overall trend of inflation remaining too high and the labor market appearing stable continues.

The June inflation data came in cool relative to expectations. There was chunky disinflation within shelter and declines in vehicle insurance and wireless services inflation. Air transportation is still elevated, but came in a bit softer than we expected.

On the other hand, the jobs report for June was a strange one. Payrolls came in under expectations, but the unemployment rate fell while both employment rates and labor force participation plummeted. It was a noisy labor market report, and it’s hard to say with any confidence exactly what it means.

FOMC Views and Fed Pricing

How Has The Data Evolved Since Last FOMC?