Fed Decision Preview: Standing Pat Remains the Baseline, but the Risk of a Surprise Rate Hike Can’t Be Ignored

BlockBeats News, July 28 — This week, US stocks face a dual test of interest rates and tech earnings. The Federal Reserve will announce its rate decision at 14:00 ET on July 29, followed by a press conference at 14:30; this corresponds to 2:00 and 2:30 on July 30 in East 8 time zone. The current target range for the federal funds rate is 3.50%-3.75%. The market still tends to bet on a pause, but the risk of a surprise rate hike has been priced in at about one third.

The Goldman Sachs David Mericle team said the Federal Reserve's decision this week is “exceptionally uncertain.” The team believes the softer inflation data in June weakened the reasoning for an immediate rate hike, and the Federal Reserve rarely raises rates suddenly in its history, so most voting members may not support action this week. However, market pricing shows investors cannot completely rule out the possibility of a 25 basis point hike.

JPMorgan’s Michael Feroli holds a more cautious view. He believes that reforms to the policy framework and communication mechanisms pushed by Federal Reserve Chair Warsh are unlikely to rapidly change the path of the interest rate in the short term. JPMorgan still expects the Federal Reserve to keep rates unchanged for the remainder of 2026, with the next rate hike likely not until September 2027. Feroli also pointed out that a softer CPI has bought time for the FOMC, but the Federal Reserve retains a tightening bias.

In contrast, Renaissance Macro Chief Economist Neil Dutta cautioned the market about a possible surprise rate hike in July. He thinks that robust employment, AI investment boosting demand, oil prices and service inflation staying high, and persistent tariff pressure could all prompt the Federal Reserve to act earlier. For US stocks, the interest rate uncertainty, combined with earnings reports from tech giants such as Microsoft, Meta, Apple, and Amazon, will directly affect risk appetite for highly valued growth stocks and AI trades.