Markets Price a 70.6% Chance of Fed Pause Ahead of Policy Decision

Investors are focused on today’s Federal Reserve policy decision, with interest rate futures indicating a 70.6% probability that policymakers will leave rates unchanged at 3.50% to 3.75%. Markets continue to assign a 29.4% probability to a 25-basis-point increase, highlighting that some uncertainty remains despite expectations favouring a pause.

While the interest rate decision itself is expected to attract significant attention, investors are likely to focus even more closely on the Federal Reserve’s accompanying statement and Chair Kevin Warsh’s press conference. Markets will be looking for fresh guidance on whether policymakers believe inflation is continuing to move in the right direction and what that could mean for the September meeting. As a result, the tone of the Federal Reserve’s communication could prove more influential than the rate decision itself.

The CME FedWatch Tool, developed by CME Group, is one of the most widely followed indicators ahead of Federal Reserve meetings. Rather than relying on economists’ forecasts, the tool uses prices from Federal Funds Futures contracts to calculate the implied probability of future interest rate decisions based on real-time market pricing. Because it reflects the expectations of investors with money at risk, it is widely used by traders, analysts and financial media to gauge how markets expect the Federal Reserve to act.

Markets Price Higher Probability of Fed Pause

Source: CME Group FedWatch Tool. Data as of 29 July 2026.

Interest rate futures indicate a 70.6% probability that the Federal Reserve will leave rates unchanged at today’s meeting, while markets continue to assign a 29.4% chance of a 25 basis point increase. Investors are expected to focus on the accompanying policy statement and Chair Kevin Warsh’s guidance for the September meeting.

These market expectations have been supported by recent economic data. Softer inflation readings have reduced immediate pressure for another rate increase. However, inflation remains above the Federal Reserve’s long-term target of 2%, while energy prices and geopolitical developments continue to present upside risks. Policymakers are therefore expected to maintain a cautious approach, balancing progress on inflation with signs of resilience across the broader economy.

Recent weakness across parts of the technology sector has added another layer of uncertainty to the outlook. Although equity performance is not a direct objective of monetary policy, softer conditions in one of the market’s most influential sectors could contribute to tighter overall financial conditions. Investors will therefore be watching whether the Federal Reserve acknowledges any signs that slower market momentum is beginning to weigh on economic activity.

Looking ahead, markets will continue to monitor inflation, employment and consumer spending data, alongside future comments from Federal Reserve officials. While today’s decision is expected to leave policy unchanged, investors will be watching closely for any indication of how the Federal Reserve views the balance of risks heading into September.

For now, investors appear comfortable with the prospect of rates remaining unchanged. However, any indication that the Federal Reserve is becoming more or less confident about inflation returning to its 2% target could quickly reshape expectations for the September meeting and drive fresh volatility across currencies, bonds and equity markets.