Will The Fed Cut Rates Tomorrow? Here's What The CME FedWatch Tool Indicates

The Federal Open Market Committee is all set to announce its next interest rate decision on Wednesday amid mounting pressure from President Donald Trump to cut benchmark rates to boost the economy.

However, data from the CME FedWatch tool indicates a 96.9% probability that the Fed will maintain interest rates at the current 4.25% to 4.5% range in July.

This comes after recent data that shows Federal Reserve Chair Jerome Powell’s fears of tariff-induced inflation have begun to materialize in data, with the consumer price index (CPI) rising by 0.3% in June on a seasonally adjusted basis, after edging up by 0.1% in May.

Meanwhile, jobless claims fell to a three-month low last week, according to a Reuters report, which could give the Fed some breathing room to keep interest rates unchanged due to the lack of deterioration in the labor market.

However, the Fed’s stance on keeping rates unchanged could change – if not in July, perhaps in September, according to Jeremy Siegel, Senior Economist at WisdomTree, and Wharton professor emeritus.

“While I do not expect a rate cut this week, it’s clear the bias is shifting toward easing. Inflation readings remain slightly softer than expected, which supports the case for eventual cuts,” Siegel said in his latest note.

Siegel argued that the Fed could cut rates in September, given that it historically discusses big policy pivots at the Jackson Hole Symposium in August.

Meanwhile, U.S. equities traded mixed in Tuesday’s midday trading.

The SPDR S&P 500 ETF (SPY), which mirrors the S&P 500 index, was down 0.15% at the time of writing, while the Invesco QQQ Trust (QQQ), which mirrors the Nasdaq 100, edged up by 0.06%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.

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