Markets Reprice July Fed Hike After Warsh’s First Meeting

One month after Federal Reserve Chair Warsh’s first policy meeting, traders repeatedly re-priced the probability of a rate increase at the July FOMC meeting. Futures-implied odds rose to roughly 39% after the meeting, climbed to about 43% when U.S.-Iran hostilities resumed and the Strait of Hormuz was briefly closed, fell to about 10% after a softer-than-expected consumer price index, and stood near 38% one day before the next meeting.

With limited formal forward guidance from the Fed, investors have focused on post-meeting commentary for signals about the committee’s reaction function — how officials will respond to incoming inflation and growth data. Market participants are watching the Fed chair’s public remarks for information that could affect short-term rate expectations.

Long-term Treasury yields have risen in 2026 alongside higher expectations for future Fed policy settings. Movements in the 10-year yield this year reflect changed forecasts for the path of interest rates rather than a rise in compensation for long-term fiscal risks, in contrast with parts of last year when fiscal concerns had a larger influence on the long end of the curve.

Two factors have been prominent in recent market moves. Shelter inflation has eased, reducing some upward pressure on core inflation measures. At the same time, disruptions to shipping through the Strait of Hormuz increased uncertainty about energy prices, which can feed into headline inflation readings.

Because forward guidance is limited, interest-rate expectations have adjusted sharply to each new data release and geopolitical development. In the days ahead, traders are pricing volatility into the policy outlook as they await Warsh’s press conference and the committee’s decision.