FOMC Preview: Can’t Hurry Doves, no Trump Just Has to Wait

The Federal Open Market Committee (FOMC) will hold rates steady for the fifth straight meeting at an upper bound of 4.5% in its July meeting. Despite the advocacy for a shift in policy from Governors Waller and Bowman, not to mention the White House, we do not expect a significant departure in the tone and communication from Chair Powell or in the official statement. With tariffs beginning to be felt in consumer prices and the unemployment rate ticking down in the intermeeting period, the Fed will signal it has the luxury to wait and further assess developments before easing restriction once again. We continue to believe the Fed will next cut its policy rate again at the October meeting and will continue doing so at each successive meeting until the rate reaches 3% in mid-2026. With the meeting un likely to bring many surprises, we think the reaction from the U . S . rates market will be limited. In our “as-expected" scenario, with yields near the middle of their recent three-month range and curves holding near their steeps, we could see a small bear flattening correction on the lack of any indication the Fed is any closer to resuming its easing cycle. Further, while we do lay out two potential risk scenarios to the meeting (one dovish, one hawkish), we do not expect recent yield ranges to be broken, with the August 1 tariff deadline and payroll report looming large in the near future. We remain bullish and long the front end and see steeper curves into year-end.