The Federal Reserve is expected to leave interest rates unchanged at its July meeting next week, but rising oil prices have prompted investors to sharply increase their bets that a fresh rate hike could come later this year.

At the start of the year, many economists expected at least one rate cut in 2026. But resurgent inflation tied to rising energy prices has prompted some forecasters to instead expect higher rates before year’s end.

Fed Chair Kevin Warsh has pledged to return inflation to the Fed’s 2% target while offering few clues about his outlook. At the Fed’s June meeting, Warsh declined to submit individual economic projections, although nearly half of policymakers said they would support a rate hike later this year.

Oil prices have surged in recent weeks, topping $100 a barrel on Thursday, suggesting that inflation may remain a stubborn issue in the near term, experts say.

“The Fed will find holding steady a harder case to make than it looked even a few weeks ago,” noted Nigel Green, the CEO of the investment firm deVere Group, in a July 23 email. 

The probability of a rate hike at Wednesday’s meeting has been rising, according to the CME Group’s FedWatch, which uses 30-day Fed funds futures prices to predict rate cut decisions. The tool now shows a 38% likelihood the central bank will hike its benchmark rate next week, up from 12% a week earlier. 

Still, the greater likelihood is that the Fed will hold its benchmark rate steady in a target range of 3.5% to 3.75%, the CME FedWatch predicts. 

Read on for details about the Fed meeting and how experts expect the central bank to approach its next federal funds decision.

What time is the Fed rate decision?

The Federal Open Market Committee, the 12-member voting body that sets rates, is scheduled to announce its next interest rate decision on Wednesday, July 29, at 2 p.m. ET.

The announcement will be followed by a press conference at 2:30 p.m. ET led by Warsh. It’s unlikely that economists and investors will gain insights into Warsh’s economic views, given that he’s vowed to share less “forward guidance,” experts say.

What will the Fed decide?

Economists polled by FactSet predict the Fed will hold interest rates steady at 3.5% to 3.75%. That would mark the fifth consecutive meeting when the central bank has left its benchmark rate unchanged.

What do experts think?

Most experts expect the Fed to remain on the sidelines at its July meeting. However, if inflation were to reignite amid escalations in the U.S.-Iran war, it could raise the probability of a rate hike later in 2026, they said.

“While a July rate hike remains highly unlikely, the September FOMC meeting could become the first meaningful test of whether the recent improvement in inflation proves durable,” Gregory Daco, the chief economist for EY-Parthenon, said in a July 22 email. 

He added, “Our base case remains that the Fed will stay on hold through the rest of the year, but it’s a 60–40 call.”