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The Federal Reserve held rates today at 3.50–3.75%. The decision was almost beside the point.
What mattered was the dot plot — Kevin Warsh's first as Fed chair. The tail has flipped: for the first time this cycle, the market is not pricing a cut. It is pricing a hike.
The forecast question
Will the FOMC hike at least once before December 31, 2026?
The Desk's weights
- 55% — Hold: commodity disinflation passes through into core CPI before the committee can act. The easing put is deferred, not dead.
- 30% — Hike: services inflation stays sticky; the December meeting goes live.
- 15% — Cut: the commodity collapse bleeds into core faster than expected. The tail the market is almost completely ignoring.
The simulation
Across 50,000 modelled paths the distribution is bimodal — a switch, not a dial. The median path: rates unchanged through year-end, with cut probability rising from 15% to ~28% by late Q4 as disinflation works through.
What changes our mind
Toward a hike: July CPI services above 4.5%, payrolls above 150k in June and July, Brent stabilising above $90.
Toward a cut: oil breaks below $70, a weak June jobs print, or a visible credit event.
Researched and edited by the UAO editorial desk. Editorial scenario analysis only — not investment, actuarial, or policy advice.