Markets price September Fed 25bp hike

Chase said on August 5 that a quarter-point Federal Reserve rate hike is now its base case for September, a notable change after the U.S. central bank left rates unchanged at its July meeting. The bank’s strategists said July’s hold, combined with energy-driven inflation pressure and uncertainty about how policymakers will respond, had “lowered the bar” for another increase. Other market gauges cited this week showed investors were still split on the likelihood of a move, with pricing shifting after fresh labor-market data and comments from Minneapolis Fed President Neel Kashkari. The July 28-29 Federal Open Market Committee meeting ended with rates unchanged at 3.50% to 3.75%, according to the Fed. ### Why did Chase change its September call? Chase said Morgan Wealth Management strategists now expect the Fed to raise rates by 0.25 percentage points at its September meeting, reversing their earlier base case of no rate changes in 2026. The bank pointed to supply-chain shocks tied to the Iran conflict that were keeping energy costs elevated and to what it described as growing investor doubt about the Fed’s inflation-fighting credibility after July’s hold. (chase.com) The July 29 decision itself gave markets material to work with. The Fed held the federal funds target range at 3.50% to 3.75%, and the vote was 9-3, with three members favoring an immediate quarter-point increase, according to the Fed and a separate Chase recap of Chair Kevin Warsh’s press conference. ### What did Kashkari say that moved pricing? (chase.com) Crypto.news reported on August 5 that odds of a Fed rate hike rose to 46% after Kashkari warned that persistent inflation and uncertainty around the Strait of Hormuz complicated the outlook for monetary policy. The report said Kashkari backed gradual rate increases rather than easing, adding to the hawkish tone already building after the July meeting. (federalreserve.gov) Neel Kashkari’s comments were one input into a broader repricing rather than a formal Fed signal. The Federal Reserve has not precommitted to a September move, and the July meeting materials published by the Fed show the committee’s official stance remained a hold while it assessed incoming data. ### Why are there different probabilities for the same meeting? (crypto.news) Golden State Mint said on August 5 that traders had cut the probability of a September hike to 57% from 67% the prior day after disappointing employment data. Its market report tied that move to an ADP release showing 44,000 private-sector jobs created in July, below estimates of 65,000 to 75,000, with June revised down to 95,000. (federalreserve.gov) Those figures do not conflict as much as they appear to. Chase was describing its strategists’ forecast, Crypto.news cited one market-based odds measure at 46%, and Golden State Mint cited traders’ pricing at 57% after the jobs data. They are different snapshots from different sources taken at different points in the repricing. (goldenstatemint.com) ### What exactly did the Fed do in July? The Federal Reserve said on July 29 that it kept the target range for the federal funds rate at 3.50% to 3.75% after its July 28-29 meeting. The Fed’s meeting page lists the statement, implementation note and press conference transcript, and says minutes from regularly scheduled meetings are released three weeks after the policy decision. (chase.com) Kevin Warsh said after the decision that the central bank “will deliver price stability” and would “not hesitate to act,” according to Chase’s recap of the press conference. That language has been part of the reason investors are treating September as a live meeting rather than assuming rates will stay unchanged through year-end. (federalreserve.gov) ### What comes next before the September decision? The Federal Reserve’s next scheduled steps are the release of the July meeting minutes and then the September policy meeting on the FOMC calendar. Between those dates, investors will be watching inflation, employment and energy-price data, the same variables cited this week by Chase, Crypto.news and Golden State Mint as drivers of the shift in September pricing. (federalreserve.gov) (chase.com)