--- title: "Pulais: It is expected that the Federal Reserve will maintain interest rates unchanged for the next 12 months, but the risk of rate hikes remains high" type: "News" locale: "en" url: "https://longbridge.com/en/news/294142812.md" description: "Prysmian expects the Federal Reserve to maintain interest rates unchanged over the next 12 months, but the risk of rate hikes remains high. Its baseline scenario is based on a moderate inflation expectation in the second half of 2026, but energy price shocks and AI-related factors pose upside risks. The bank believes that Federal Reserve Chairman Waller is inclined to cut rates after inflation improves, rather than raising rates immediately, and points out that market volatility may persist due to reduced forward guidance" datetime: "2026-07-29T02:57:03.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/294142812.md) - [en](https://longbridge.com/en/news/294142812.md) - [zh-HK](https://longbridge.com/zh-HK/news/294142812.md) --- # Pulais: It is expected that the Federal Reserve will maintain interest rates unchanged for the next 12 months, but the risk of rate hikes remains high According to the Zhitong Finance APP, Blerina Uruci, Chief Economist at T. Rowe Price, stated before this week's Federal Open Market Committee (FOMC) meeting that her baseline scenario predicts the Federal Reserve will keep interest rates unchanged for the next 12 months, but there are significant two-sided tail risks regarding policy direction. This prediction is primarily based on the expectation of relatively moderate inflation trends in the second half of 2026. However, the risk of interest rate hikes remains high, mainly reflecting the uncertainty brought about by energy price shocks; at the same time, factors related to artificial intelligence and a potentially accelerating labor market still pose short-term inflationary risks. T. Rowe Price indicated that the Federal Reserve's reduction in forward guidance suggests that market volatility may continue. Since June, there have been significant changes in short-term U.S. Treasury yields and market pricing of the Federal Reserve's interest rate path, reflecting this. In this meeting, close attention will be paid to the number of dissenting votes to assess the degree of disagreement within the FOMC. The market expects the voting outcome to be 10 votes in favor and 2 against, with Dallas Federal Reserve Bank President Lorie Logan and Cleveland Federal Reserve Bank President Beth Hammack possibly casting dissenting votes advocating for a 25 basis point rate hike. Even if the Federal Reserve remains on hold in July, if dissenting votes exceed three, it will more clearly reflect that the committee is gradually leaning towards a rate hike in September. Investors are currently roughly divided into two camps. The first camp believes that Federal Reserve Chairman Waller is actually leaning towards a "hawkish" stance, and if inflation does not slow down, he will not hesitate to raise rates in the short term. The second camp believes that although Waller's rhetoric is tough, as long as inflation continues to improve, even if the economy remains resilient, he will ultimately lower rates. Blerina Uruci tends to lean towards the second view and believes that Chairman Waller is not as prepared to raise rates in September as the current market pricing reflects. Regarding inflation, T. Rowe Price expects relatively moderate inflation trends in the second half of 2026, and inflation expectations will remain stable. However, energy price shocks are the main risk to this prediction. Other potential risks include: AI-related demand having a more significant impact on core commodity prices than the market expects, exceeding the current market's general expectation of about a 0.2 percentage point increase in the annual Consumer Price Index (CPI); a re-acceleration of the labor market leading to increased wage pressures; or the continued pass-through of tariff costs to consumer prices following the Trump administration's announcement of a new round of tariff measures. In the absence of forward guidance and with the policy response mechanism of the Federal Reserve under new leadership still unclear, T. Rowe Price believes that the market will continue to test how far short-term rate hike expectations can be pushed, thus maintaining volatility in the interest rate market. However, the market still needs a framework to determine how much the Federal Reserve ultimately needs to raise rates. The current market pricing seems to be based on the assumption that the Federal Reserve will reverse a total of 75 basis points of "preventive rate cuts" by the end of 2025. If this judgment is correct, and the market currently reflects an accumulated rate hike expectation of about 55 basis points by next April, it means that the market has almost fully reflected a "hawkish" scenario from the Federal Reserve. Under this assumption, if the market is to further factor in four or more rate hikes, it may require another significant inflationary shock that exceeds expectations. T. Rowe Price stated that based on the information currently available, the likelihood of such an inflationary upward shock seems lower than the likelihood of inflation continuing to decline to normal levels ### Related Stocks - [TROW.US](https://longbridge.com/en/quote/TROW.US.md) ## Related News & Research - [Will they or won't they? 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