BNP Paribas Expects Fed to Hold July Rates, Sees December Hike as Base Case

According to BNP Paribas Markets 360, on July 29, the bank expects the Federal Reserve to maintain interest rates at their current level, though a surprise rate hike cannot be entirely ruled out. The base case scenario is a single rate hike in December; however, the bank noted there is significant risk that policymakers will strengthen inflation language in the FOMC statement, signaling that a September hike is already on the agenda.

BNP Paribas flagged that language on price stability will be a key focus of the meeting, and the statement is expected to reflect policymakers' willingness to take action if necessary. The bank also anticipates Chair Powell will follow the pattern from June's press conference with a brief opening statement, concise answers, and limited forward guidance.