多年来“最不确定”的一次，今晚的美联储会给“惊吓”吗？

Original Author: Zhao Ying

Original Source: Wall Street CN

Tonight's Federal Reserve decision is highly likely to remain unchanged, but the market's real concern is not the baseline scenario, but rather a rare surprise rate hike or a pause with a sufficiently hawkish tone.

At 2:00 AM Beijing time on July 30th, the Federal Reserve will announce its latest interest rate decision. This meeting has no dot plot or economic forecast updates, and the federal funds rate target range is expected to remain at 3.50%-3.75%. According to a Reuters poll, all 104 respondents expect rates to remain unchanged. However, the money market still prices in approximately a 32% probability of a rate hike this week and factors in a tightening of about 42 basis points for the year, making tonight the most "uncertain" meeting in recent years.

The uncertainty stems from a tug-of-war between two forces. June's CPI came in below expectations across the board, non-farm payrolls were weaker than forecast, and oil prices fell before the meeting, all providing room for the Fed to continue waiting. However, inflation remains above target, the Middle East situation and oil prices are volatile, some Fed officials have recently adopted a hawkish tone, and coupled with Chairman Warsh's lack of a clear policy record, the market finds it difficult to completely rule out the risk of a rate hike.

UBS Chief US Economist Jonathan Pingle stated, the degree of uncertainty he feels about the upcoming Fed decision is the highest in 20 years—the last time he felt similarly was when Bernanke first took over as Fed Chairman. "Warsh will dominate policy direction over the next few meetings, and we know almost nothing about how he views monetary policy."

For investors, the risks are concentrated in short-term interest rates, the US dollar, and the immediate reaction of US stocks. According to JPMorgan's Market Intel, if the Fed unexpectedly raises rates by 25 basis points, the S&P 500 could fall 1.5%-2%; a 50 basis point hike could lead to a decline of 2%-4%. Even if rates are kept unchanged, a hawkish statement and press conference could limit the rebound in risk assets.

Market Consensus is a Pause, but Pricing is Not Calm

Based on traditional forecasts, this decision seems straightforward. According to a Reuters poll, all 104 economists expect the Fed to hold rates steady. Of these, 78 expect no rate adjustment for the remainder of the year, and only 6 anticipate a rate cut.

However, the same survey shows that 66% of respondents believe the likelihood of a rate hike this year is "high," a significant shift from the "low" mainstream assessment in June. Market pricing also indicates investors are paying for the tail risk of a rate hike. Traders are currently pricing in not just a roughly 30% chance of a hike this week, but are fully pricing in a 25 basis point hike by September and nearly 50 basis points of tightening by March next year.

Goldman Sachs believes this pricing means the meeting outcome is "unusually uncertain." If the Fed raises rates, it would be a historically rare surprise move; if it doesn't, the market will quickly re-evaluate the previously priced-in rate hike risk. Ian Lyngen of BMO Capital Markets notes that since 2015, traders' average error in forecasting the final rate decision the day before a Fed meeting has been only 2.4 basis points. This time, the market is more susceptible to sharper-than-usual immediate reactions.

Data Supports Waiting, but Inflation Risks Remain

The case for the Fed to pause primarily rests on recent data. June's CPI came in below expectations, weakening the rate hike bets spurred by Warsh's earlier hawkish comments. Warsh had stated that if June's core CPI ran hot, a near-term rate hike should be considered; if the data was cool, he would need to see more similar readings before considering it a clear signal.

The labor market also gives the Fed more time to observe. June's non-farm payrolls were weaker than expected, prior months' data were revised down, and the net revision over two months was a decrease of 74,000 jobs, compared to a previous increase of 93,000. Although the unemployment rate fell slightly, data suggests this was mainly due to a decline in overall labor force participation.

Oil prices are another key variable. The conflict between the US and Iran escalated after the last meeting, with related memorandums of understanding violated and both sides launching strikes. However, strikes were paused during the weekend before the meeting, reducing geopolitical risk premiums and causing oil prices to fall back, helping to moderate inflation expectations. Fed officials have also previously cautioned against reacting too quickly to what might be temporary supply shocks.

The problem is that underlying inflation remains significantly above target. Morgan Stanley points out that upside risks include persistently high oil prices, a more hawkish Fed reaction function, and AI-driven investments pushing up the neutral rate. Goldman Sachs also believes that the combined impact of tariffs, war, and AI statistical errors on monthly inflation may weaken in the future, but uncertainty remains high. Once progress on inflation stalls, discussions about rate hikes within the Fed could reignite.

Communication in the Warsh Era is a Risk in Itself

The previous FOMC meeting chaired by Warsh was also his first. The statement was significantly shortened, removing forward guidance language and strengthening the committee's commitment to bringing inflation back to the 2% target. This means that even subtle wording changes this time could be amplified by the market.

Morgan Stanley expects the statement to remain largely unchanged, including reaffirming the "ample reserves" policy, describing economic activity as expanding "at a solid pace" despite high uncertainty, with unemployment "little changed" and inflation remaining "elevated." Without the Summary of Economic Projections this month, policymakers don't need to reset market expectations through the dot plot.

The press conference is likely more important. Warsh is expected to be questioned about the impact of the Middle East conflict on inflation, the newly announced Chairman's Working Group, and whether the latest data would advance the timeline for policy action. Goldman Sachs expects Warsh will not provide clear policy signals but will emphasize that all options remain open and future decisions depend on the data.

Credit Agricole believes the Fed is entering a new phase with more limited forward guidance, which will turn more meetings into genuinely "live" ones. The bank expects the Fed to hold steady this time and believes the data since the last meeting has at least bought time for ongoing pauses. Regarding Warsh's five newly established working groups, Credit Agricole does not anticipate major updates in the near term, with recommendations likely not completed until close to year-end, suggesting balance sheet policy is unlikely to change soon.

Divergence Widens, a Pause Could Come with Dissent – Watch for Dissenting Votes

Internal divisions within the Fed are central to the uncertainty of this meeting. In the June forecasts, 9 of the 18 participants submitting projections anticipated at least one rate hike this year. Since then, comments from several officials suggest they are willing to consider further tightening if the disinflation process stalls.

Waller and Cook have both indicated they might consider tightening policy if the disinflation process stalls. 2026 voters Logan and Hammack have delivered more hawkish speeches. Logan argued that the policy rate should be moderately higher to better balance the outlook and risks and believes restrictive policy is still needed to help bring inflation back to target. Hammack directly stated that the Fed might need to consider raising rates.

Therefore, even if rates remain unchanged, dissenting votes could emerge. Based solely on recent commentary, if the Fed chooses to pause, there could be 2 to 4 dissenting votes in favor of a rate hike. Goldman Sachs expects the statement this time might acknowledge the upside inflation risk from geopolitical conflicts, and at least one committee member might vote for a rate hike.

Bank of America analyst Mark Cabana expects the Fed to hold rates steady on Wednesday but could attract dissenting votes from regional Fed presidents like Lorie Logan and Beth Hammack. He also noted that as long as the market doesn't rule out the risk of a rate hike, strategists won't either.

A Few Institutions Bet on a Rate Hike 'Shock'

While the mainstream view is still a pause, some institutions are explicitly betting on a surprise rate hike. Citadel Securities is a notable outlier, with its Head of Macro Strategy, Frank Flight, changing his baseline scenario this week to a 25 basis point hike. He believes this would strengthen Warsh's credibility in fighting inflation and "definitively end the era of forward guidance."

PGIM's Global Head of Bonds and Chief Investment Strategist, Robert Tipp, also said the market might be underestimating the probability of action on Wednesday. He suggests that Warsh has essentially set the stage for a rate hike, and delaying the decision now could increase the probability of a 50 basis point hike in September.

Wrightson ICAP Chief Economist Lou Crandall stated that the Fed lacks a sufficient reason not to raise rates. Bond market veteran Harley Bassman even argued that the Fed should hike rates by 50 basis points in one go to reinforce its anti-inflation credibility.

However, Goldman Sachs still believes that most FOMC voters are unlikely to push for a rate hike this week following the softer June inflation data. The bank also pointed out that the Fed historically avoids surprising the market with rate hikes, especially during meetings without a Summary of Economic Projections, as officials may be more concerned about the market overinterpreting their intentions.

Asset Reaction: A Rate Hike is the Biggest Shock, a Hawkish Pause is No Walk in the Park

JPMorgan's Market Intel lists a "hawkish pause" as its baseline scenario, with a 50% probability. In this scenario, the S&P 500 could range from a gain of 0.25% to a loss of 0.50%. The logic is that the Fed would pause due to resilient labor market and growth but continue emphasizing vigilance on inflation.

In the event of a surprise 25 basis point hike, JPMorgan expects the S&P 500 to fall 1.5%-2%, with the Nasdaq 100 potentially declining more sharply. A 50 basis point hike could lead the S&P 500 down 2%-4%. In a "dovish pause" scenario—holding rates steady with accommodative communication—the S&P 500 could rise 0.50%-1%. In the options market, options expiring on July 29th price in approximately 0.8% movement in the S&P 500, lower than the roughly 1.1% pricing for recent CPI events.

On the foreign exchange front, Goldman Sachs' FX team believes that if the Fed pauses, the US dollar could weaken tactically, but this weakness would likely be short-lived as long as energy prices remain high. Over the medium term, if the Fed keeps rates unchanged for the rest of the year as Goldman's economists expect, it would exert mild but manageable pressure on the USD versus G10 currencies.

The focus in the rates market is on the front end. Goldman Sachs' rates desk believes the market might misinterpret the "lack of forward guidance" as deliberate obfuscation. The desk tends to think that if the Fed Board of Governors does not support a rate hike, the hawkish voters lack the sufficient votes to push for action this week. However, if the pause in July is maintained, Warsh could still deliver a hawkish pause and pave the way for a September rate hike.

In commodities, Goldman Sachs' crude oil desk states that oil risk premiums are rapidly fading following a de facto ceasefire between the US and Iran over the weekend and progress in negotiations to reopen the Strait of Hormuz. However, upside risks haven't disappeared; oil prices could rise again if attacks on Saudi oil facilities or production continue. Gold has been trading in a roughly $250 range over the past two months. The desk maintains a long-term bullish view but prefers tactical trading around news events.

This means the key point tonight isn't just whether rates change, but how Warsh explains the "no change" or "change." Against a backdrop where the market has already paid for the risk of a rate hike, while economists are nearly unanimous in predicting a pause, whichever path the Fed chooses is likely to deliver a significant jolt to the market.