Fed interest rate decision: JPMorgan analysts expect to keep rates unchanged today

The Fed expects to keep rates unchanged today, but the market is still betting on an unexpected rate hike

The Fed is expected to keep rates unchanged today, although the market still believes there is a significant possibility of an unexpected rate hike. The Federal Open Market Committee will release its policy decision at 2:00 p.m. ET on Wednesday. Federal Reserve Chairman Kevin Walsh will deliver a speech at 2:30 p.m. EDT, and investors will pay close attention to his guidance on inflation, future interest rate hikes and market risks.

JPMorgan expects a "hawkish pause" by the Federal Reserve

JPMorgan's market strategy believes that the probability of a "hawkish pause" by the Federal Reserve is 50%, that is, keeping interest rates unchanged, but warning that inflation risks still exist. In this case, the S & P 500 could be roughly flat or down 0.5%. The bank also believes that a "dovish pause" is more beneficial to the stock market. If Walsh shows confidence in slowing inflation, the S & P 500 could rise as much as 1%.

An unexpected 25 basis point rate increase may trigger a more drastic market reaction. JPMorgan predicts that the result could cause the S & P 500 to fall by 1.5% to 2%, with technology stocks facing the most pressure.

Markets still expect the Federal Reserve to maintain its benchmark interest rate between 3.50% and 3.75%. However, the interest rate outlook has become less clear as Walsh has abandoned strong forward guidance.

Risk of unexpected interest rate hikes keeps markets cautious

Castle Securities expects the Federal Reserve to raise interest rates this week, a move that runs counter to widespread market expectations. Frank Flatt, the company's head of macro strategy, said a 25 basis point rate hike would enhance Walsh's credibility in fighting inflation. This view also suggests that policymakers may want to show that not every decision requires early signals. The change has left investors feeling less confident ahead of today's meeting.

Futures and forecast markets show wide differences. Some market indicators show that the probability of suspending interest rate hikes is between 64% and 79%, while the probability of interest rate hikes is about 21% to 36%. Forecast market traders recently showed a 75% probability that the Fed will keep interest rates unchanged, and a 25% probability that Walsh and the Fed will raise interest rates by 25 basis points.

This uncertainty stems from the fact that the last Federal Open Market Committee meeting showed stronger support for austerity. According to reports, half of the officials supported raising interest rates at the time, making today's voting results even more noteworthy. The rising proportion of officials supporting another rate hike may put pressure on stocks, cryptocurrencies and precious metals. Traders are watching to see whether the statement hints at possible September action.

Inflation and Bitcoin prices intensify the focus of Fed decision-making

Inflation remains above the Fed's 2% target, putting continued pressure on policymakers. Consumer prices rose 3.5% year-on-year in June, down from 4.2% in May. Core inflation also slowed to 2.6 percent from 2.9 percent, giving officials some waiting room. However, energy prices, tariffs and AI data center spending continue to raise concerns about cost pressures. Tensions in the Middle East sometimes push up oil prices, posing another risk to inflation. Tariffs on imported goods also add pressure to the supply chain.

Washi recently stated in Congress that he had "zero tolerance" for continued high inflation. The comment left investors wary of possible hawkish signals, even if rates remain unchanged today.

Bitcoin also fluctuated before the Federal Reserve's decision. The asset fell below $63,000 on Tuesday and then recovered above $64,500 as traders reduced exposure ahead of the announcement.

Cryptocurrency markets remain sensitive to Fed policies because high interest rates reduce demand for risky assets. Keeping interest rates unchanged could bring short-term relief, while an unexpected rate hike could put pressure on Bitcoin, Ethereum and other major tokens.