July 30, 2026 · Decision research
Rates Fed Regime
Finding
The "hike vs hold" framing of the sweep is correct as the base case, but the supporting "0% probability of a cut through September" line is the weakest link and is wrong as stated. Live data shows ~13.5% cut odds at the September meeting and a small residual cut probability still priced through year-end 2026. Action stays "consider" but the asymmetric cut tail must be carried as an explicit risk, not waved away.
What changed
The Fed held at 3.50-3.75% for a fifth straight meeting with a 9-3 vote; Hammack (Cleveland), Kashkari (Minneapolis), and Logan (Dallas) dissented in favor of a 25bp hike (; ). The market response is hawkish across asset classes: 2-year Treasury yield +5bp to 4.27%, 10-year to 4.41%, S&P 500 -1.52%, Dow -2.19%, Nasdaq -1.74% (). Chair Warsh explicitly dropped forward guidance, telling reporters "we need to observe market reaction to developments direct and unfiltered" and that the Fed "won't be providing further hints about where rates are heading" (). Markets now price ~70-82% odds of a hike at September 16-17 and ~13.5% probability of a cut, not zero (; ).
Decision
Keep ACTION_CHANGED = "consider" but do not pivot to "long-duration / cut-trade" or "add front-end short." The data tilts the base case to hike-or-hold at September, not cut. What changes is the falsifier threshold: position sizing should now assume a 10-15% cut tail risk is real and priced, not 0%. Net: stay neutral duration, hedge both tails, and re-test after July CPI (Aug 12) and Jackson Hole.
Watch next
(1) CME FedWatch rolling 7-day reading for September - a drop below 50% hike probability would signal the market is re-opening the cut question. (2) July 2026 CPI on or around Aug 12-14; headline below 2.5% YoY or core below 3.0% YoY would break the hike thesis. (3) Any Powell/Williams speech Aug 1-Sep 10 - a hawkish dissent count above 3 at the September meeting would force a hike. (4) Oil price: a drop below $70/bbl WTI compresses headline CPI and re-opens the cut tail. (5) The Sep 15-16 dot plot median path - any downward revision in 2026 dots from June's projection re-opens cuts.