Nomura US Economic Weekly: Rate Hike Expectations Rise, but July Still Expected to Hold Steady

English summary

July FOMC expected to keep rates unchanged - Expected to maintain federal funds rate target range at 3.50%-3.75%, with no substantive changes to the statement and no new economic projections or dot plot this meeting. The market's recent increase in July rate hike probability mainly reflects limited Fed forward guidance and uncertainty about its reaction function, not a clear change in the economic outlook. Cleveland Fed President Hammack and Dallas Fed President Logan are expected to vote for a hike, forming two hawkish dissents; Minneapolis Fed President Kashkari joining the opposition is a risk scenario. Warsh to emphasize anti-inflation credibility but not specify hike threshold - Expected to continue emphasizing the Fed's anti-inflation credibility at the press conference, but will not specify the threshold for triggering a rate hike or provide clear guidance on future policy actions. He may also reiterate some dovish views, including AI's dampening effect on inflation, skepticism about official inflation data quality, and the impact of money growth on the inflation outlook. ...