Fed Lifts to 5.25–5.50% in July
What Happened
On July 26 the Fed raised rates by 25 bps to 5.25–5.50%, matching market expectations after a June pause. Chair Powell said another hike was possible if inflation progress stalled but emphasized data dependence.
What It Means
The move restored the pace after June’s skip and kept real rates firmly positive. Futures implied one more possible hike but began to price cuts for 2024 as inflation cooled and growth showed resilience.
What I Think
This felt like the last deliberate step unless inflation re-firms. I’m watching core services and credit conditions; absent a re-acceleration, the Fed will prefer to hold rather than overtighten. Markets will test that patience quickly.
Market Terms
- 5.25–5.50% terminal band – Policy rate after July’s 25 bp move.
- Data-dependent stance – Fed willing to hike again only if inflation progress stalls.
- Positive real rates – Policy settings now above inflation, tightening conditions.
- 2024 cut path – Futures already penciling in next-year easing despite hawkish optionality.
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