UOB: Fed Set for Extended Pause but Hike Risk Is Rising

UOB strategists expect the Federal Reserve to hold the federal funds rate steady at 3.50%–3.75% during the July FOMC meeting.

Their base-case outlook calls for an extended pause through 2026, with the first rate cuts not arriving until Q2 and Q4 of 2027, once transitory inflation subsides.

Despite the long pause, the team highlights that the risk of a rate hike is rising, reflecting a scenario where underlying price pressures fail to ease as anticipated.