Morning Market Tidbits: Markets are discerning between bimodal Fed paths

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Morning Market Tidbits: Markets are discerning between bimodal Fed paths

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Morning Market Tidbits

Markets are discerning between bimodal

Fed paths

Key takeaways 20 July 2026

Economics• The market is pricing the least likely path for Fed policy as it tries to distinguish

United States

between a bimodal set of outcomes.

• The question is not one or two hikes, but rather whether a proper hiking cycle is Claudio Irigoyen

Global Economist

coming or not, keeping volatility elevated. BofAS

claudio.irigoyen@bofa.com

• Today is a light data day, with the June leading economic indicators the only release

Antonio Gabriel

on the calendar. Global Economist

BofAS

antonio.gabriel@bofa.com

What Matters Today: Volatile Fed pricing is likely reflecting a bimodal distribution of See Team Page for List of Analysts

outcomes, between the Fed remaining on hold or doing a proper hiking cycle

Fed fund rate, market pricing vs BofA forecast (mid-point, %)

4.50

BofA Market pricing (July 13) Market pricing (July 17)

4.25

4.00

3.75

3.50

Jun-26 Aug-26 Oct-26 Dec-26 Feb-27 Apr-27 Jun-27

Source: BofA Global Research, Bloomberg

BofA GLOBAL RESEARCH

The market is pricing the least likely path

Before the June CPI print, the market was ready to price the first hike in July conditional

on inflation surprising to the upside, with September almost fully priced. The soft print

removed July and left September as a coin toss. Currently the market is pricing around a

hike and a half over the next 3 quarters. Ironically, it is quite clear that the priced path is

very unlikely to materialize.

The real discussion is on hold or a proper hiking cycle

Is it because there is uncertainty about whether the Fed will deliver 1 or 2 hikes over the

next 3 quarters? Not really.