Federal Reserve likely to hold rates July 29 as oil prices surge

A Reuters poll shows a 77% probability the Federal Reserve will keep its policy rate unchanged at the July 29 meeting, while Brent crude jumped more than 3% to a six‑week high of $90.29 a barrel, stoking inflation worries and lifting gold to $4,078.76 an ounce【2】.

Market backdrop

Oil’s rise reflects renewed Middle‑East tensions, with strikes in the Strait of Hormuz and threats from Iran‑backed Houthis prompting concerns over supply disruptions. The price increase marks the biggest weekly gain since early May and pushes Brent to its highest level in six weeks, far above the $85‑$87 range that analysts had expected a week earlier. Higher crude prices feed into inflation expectations, which in turn keep the Fed’s policy outlook on the table.

Gold’s jump mirrors the same risk‑off sentiment. Spot gold rose 1.8% to $4,078.76, while gold futures added 1.6% to $4,081.85. The metal’s rally is typical when investors fear that rising oil‑driven inflation could force the Fed to tighten further, even though the poll suggests a hold at the upcoming meeting.

Policy expectations

The Reuters survey of 104 economists indicates that most expect no change to the Fed funds rate at the July meeting, with 78 respondents also forecasting a hold for the rest of the year. However, 66% see a higher probability of a rate hike later, and the odds of a December increase sit at 81%【2】. The Fed’s dual mandate of price stability and full employment means that persistent oil‑price shocks could shift the balance toward tighter policy if inflation remains above the 2% target.

Market reaction

U.S. equities rose modestly as chipmakers rebounded, while the dollar index edged up 0.12% to 101.11, reflecting the usual strength of the greenback when rate hikes are anticipated. Treasury yields climbed, with the 10‑year note gaining roughly 3.5 basis points to 4.63%, a move that typically pressures non‑yielding assets like gold【3】.

What to watch

• July 29 Fed meeting – monitor the official statement for any language on inflation risks or oil‑price impacts.
• Upcoming oil data – U.S. crude inventories and OPEC production reports this week could confirm or ease supply concerns.
• Gold and Treasury yields – a breach of $4,100 for spot gold or a 10‑year yield above 4.70% would signal stronger market expectations of tighter policy.

The odds of a July hold suggest the Fed will pause while gauging the inflationary impact of soaring oil prices, but the market remains poised for a possible rate hike later in the year if the commodity shock persists.