Federal Reserve Decision Preview: Status Quo to Remain, Risk of Unexpected Rate Hike Looms

July 28: The U.S. stock market will face a dual test of interest rates and tech earnings this week. The Federal Reserve will announce its rate decision at 2:00 pm Eastern Time on July 29 and hold a press conference at 2:30 pm; this corresponds to 2:00 am and 2:30 am Beijing Time on July 30. The current federal funds rate target range is 3.50%-3.75%, and the market still tends to bet on status quo, but the risk of a surprise rate hike has been priced in at about one-third.

The Goldman Sachs team led by David Mericle stated that the Fed decision this week is "exceptionally uncertain." They believe that the softening of June inflation data has weakened the case for an immediate rate hike, and the Fed has rarely hiked rates abruptly in history, so most voters may ultimately not support action this week. However, market pricing indicates that investors have been unable to completely rule out the possibility of a 25 basis point rate hike.

JPMorgan's Michael Feroli holds a more cautious view. He believes that the policy framework and communication mechanism reforms driven by Fed Chair Warsh make it difficult to quickly change the rate path in the short term. JPMorgan still expects the Fed to keep rates unchanged for the remainder of 2026, with the next rate hike possibly not until September 2027. Feroli also pointed out that the softened CPI has bought time for the FOMC, but the Fed still maintains a tightening bias.

On the other hand, Renaissance Macro's Chief Economist Neil Dutta warns the market to be alert to a surprise rate hike in July. He believes that stable employment, AI investment boosting demand, high oil and service inflation, and ongoing tariff pressures could all prompt the Fed to act early. For the U.S. stock market, the rate suspense combined with earnings reports from tech giants like Microsoft, Meta, Apple, Amazon, etc., will directly impact the risk appetite of high-valuation growth stocks and AI trading.