Both Wall Street and Main Street believe the central bank will hold rates steady at the upcoming meeting.
- In a Stocktwits poll that sought to gauge retail investors’ views, 67% of the 13,600 who voted said the Fed would hold rates steady.
- According to data from the CME FedWatch tool, markets believe there’s a 62.1% chance that the central bank will keep rates steady, a decrease from an 80% probability last week.
- However, U.S. President Donald Trump is calling on the Fed to lower interest rates, saying that there are “other countries that are paying less interest rates” than the U.S.
The Federal Reserve’s July meeting is slated to begin today, where policymakers will decide on key interest rates amid the ongoing conflict with Iran and inflation pressures. Nearly seven in ten retail investors expect the central bank to hold rates steady at this week’s FOMC meeting, according to a Stocktwits poll, putting Main Street largely in line with Wall Street’s expectations.
Despite easing inflation data, Fed Chairman Kevin Warsh continues to grapple with inflationary pressures that have remained above the central bank’s 2% target since 2021.
While the annual consumer price inflation rate unexpectedly slowed to 3.5% in June, renewed increases in oil prices, driven by escalating tensions in the Middle East in recent weeks, have raised fresh concerns.
Retail Expects Another Fed Pause
In the poll that sought to gauge what retail investors think, 67% of the 13,600 who voted said the Fed would hold rates at current levels of 3.50% to 3.75%.
Meanwhile, 18% voted for a rate hike, while 15% said that the central bank was likely to cut interest rates.
One user said, “Warsh will never raise rates now. Especially before midterms and especially not to do anything against his boss right now.”
Another user said, “Cut this time around isn’t even in the equation. A hike still has a puncher’s chance.”
Wall Street Also Sees A Hold — But Confidence Is Slipping
According to data from the CME FedWatch tool, markets believe there’s a 62.1% chance that the central bank will keep rates steady, a decrease from an 80% probability last week.
However, U.S. President Donald Trump is calling on the Fed to lower interest rates, saying that there are “other countries that are paying less interest rates” than the U.S.
According to Brett House, an economics professor at Columbia Business School, bringing inflation back under control is likely to remain Warsh’s priority despite Trump’s calls for lower interest rates, as per a CNBC report. House said that focus could put the Fed on a collision course with the White House, making near-term rate cuts unlikely.
One Wall Street Firm Is Calling For A Surprise Hike
However, Citadel Securities is forecasting a surprise interest rate hike by the Federal Reserve this week. Frank Flight, head of macro strategy at Citadel Securities, reportedly said, “The market may once again be underestimating the extent of the hawkish shift at the Fed.”
Meanwhile, among exchange-traded funds tracking benchmark indexes, the SPDR S&P 500 ETF (SPY) was down 0.27% at the time of writing amid ‘bearish’ sentiment.
The Invesco QQQ Trust (QQQ) and the SPDR Dow Jones Industrial Average ETF Trust (DIA) were also down 0.84% and 0.01%.
Retail sentiment on Stocktwits for QQQ dropped to ‘extremely bearish’ from ‘bearish’ in 24 hours, while it rose from ‘neutral’ to ‘bullish’ for the DIA.
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