If the Federal Reserve raises rates by 25 bps tonight, the rate range would come to 3.75%–4.00%, with the midpoint at 3.875%.
Meanwhile, the Fed’s June SEP median forecast for the federal funds rate at the end of 2026 is 3.8%.
That means if this hike goes through, the policy rate will have roughly reached the year-end level that participants were expecting three months ago.
After the hike, the key question is whether the Fed still thinks current rates are high enough. That’s what matters most tonight.
Now, the market’s pricing for a 25 bps hike tonight is already close to 93%; part of that has already been anticipated, absorbed, and priced in by the market.
What’s more worth watching now is the new rate forecast, the dot plot, and the remarks from the press conference in terms of the future rate path.
If the subsequent rate path does not continue to be raised meaningfully, this would look more like a policy adjustment aimed at addressing recent inflation pressures.
But if the new rate forecasts continue to move higher—while leaving more room for additional hikes going forward—then what the market reprices won’t just be tonight’s 25 bps. It would be that future rates could be higher and remain elevated for longer.
Meanwhile, the Fed’s June SEP median forecast for the federal funds rate at the end of 2026 is 3.8%.
That means if this hike goes through, the policy rate will have roughly reached the year-end level that participants were expecting three months ago.
After the hike, the key question is whether the Fed still thinks current rates are high enough. That’s what matters most tonight.
Now, the market’s pricing for a 25 bps hike tonight is already close to 93%; part of that has already been anticipated, absorbed, and priced in by the market.
What’s more worth watching now is the new rate forecast, the dot plot, and the remarks from the press conference in terms of the future rate path.
If the subsequent rate path does not continue to be raised meaningfully, this would look more like a policy adjustment aimed at addressing recent inflation pressures.
But if the new rate forecasts continue to move higher—while leaving more room for additional hikes going forward—then what the market reprices won’t just be tonight’s 25 bps. It would be that future rates could be higher and remain elevated for longer.
