CME Data Shows 88.8% Probability Fed Will Hold Rates Steady in July

Summary

CME FedWatch data shows the probability of the Fed holding rates steady in July has surged to between 85.6% and 88.8% Golden Finance. This represents a sharp reversal from earlier in the week, when geopolitical tensions and oil price spikes pushed the implied probability of a 25bps hike to nearly 50% QQ News+ 2. The primary catalyst for this shift was the June CPI report, which came in cooler than expected at 3.5% benzinga_article+ 2.

Impact Analysis

So the market has basically priced out the July hike that everyone was panicking about just days ago. Remember when oil shocks and Waller’s warnings had the 25bp hike at a 50% coin flip? Businesstimes News+ 2 The cooler June CPI changed the narrative instantly, dragging pause odds back toward 89% Golden Finance+ 2. It’s a classic case of a single data point overriding geopolitical noise.

However, I think the market is getting a bit too comfortable. While headline CPI cooled, Goolsbee is right to flag that PCE at 4.1% is still way off-target Tip Ranks. With Chair Warsh maintaining a hawkish tilt, we’re likely looking at a ‘hawkish pause’—holding rates but using the dot plot or statement to keep a September hike firmly on the table FX678. The 14-basis-point drop in the 2-year yield looks like an overreaction FX678. I wouldn’t chase this rally in long duration or gold just yet; if the Fed’s rhetoric remains aggressive despite the pause, we’ll see a quick repricing of that September risk.