Institution: Fed's July Rate Hike Window Opens, Delay to September May Face Political Backlash Risk

July 29, Chief Investment Officer and Director of Investment Management and Research at D.A. Davidson, James Ragan, said that since the last Fed meeting, inflation data has been moderate, job growth has been steady, but the escalation of US-Iran military conflicts in July has disrupted these positive trends.

This means that the inflation progress made in June at an overall level may be reversing, and the Fed must assess whether the inflation trend at the core level is more sustainable.

If the Fed determines that higher inflation expectations are forming, they should raise rates in July instead of waiting until September. This is especially true considering the midterm elections later this year, as taking action at that time could invite political criticism.

According to CME's "FedWatch," the probability that the Fed will keep rates unchanged in July is currently at 69.5%, while the probability of a 25 basis point rate hike is at 30.5%.