US: *NVIDIA SHARES EXTEND GAIN TO 2.9% DURING EARNINGS CALL

A few analysts on the more dovish end of the rate outlook spectrum, looking for 50 to 75bp of cuts through end-2027 include:

• Goldman Sachs: “Market pricing implies that investors see the outcome of the July meeting as unusually uncertain, likely because the FOMC has been split recently, Chairman Warsh’s own position remains unclear, and some of the re-escalation with Iran occurred during the blackout period. But most voters appear unlikely to push for a hike next week after the softer June inflation data, the Fed has historically avoided delivering surprise rate hikes, and we suspect that voters might be especially reluctant to do so at a meeting without a Summary of Economic Projections.” Future action: 25bp cuts in Jun and Dec 2027. “while our baseline forecast remains that the Fed will remain on hold through year-end, we have raised our probability of eventual rate hikes from 25% to 35%.”
• ABNAmro: “The recently released FOMC minutes for the June meeting provided a useful guide to the FOMC’s reasoning. It contained a key paragraph outlining the fact that the FOMC essentially sees two plausible scenarios. The first is one where inflation improves ‘soon’, where they deem it appropriate that rates will be held steady in the near term before eventually being cut. The word ‘soon’ is ill-defined, but it suggests the pace of inflation needs to improve in the coming months. The second scenario is one of sticky inflation (due to e.g. AI-related demand, the energy shock or tariffs) and a stable labour market, which would require ‘some firming’.” Future action: 25bp cuts each meeting from Mar to Jun 2027 (75bp total)
• UBS: “The 18 FOMC participants other than Chairman Warsh are evenly split, between hiking and not hiking this year. Let's assume for July, and perhaps September too, that the split between hikers and holders is about even. Then, we assume the participants that want to hike probably have more conviction about hiking than the holders have about holding. Thus, if Chairman Warsh wanted to tip the scales, and nudge a few holders to become hikers, Warsh probably could get the FOMC to raise rates, if that is what he wanted. Hence the uncertainty. He's the median voter in a way, and we do not know how he wants to vote.” Future action: 25bp cuts in Q1 Q2 and Q4 2027
• Citi: “We and almost all other economists who submit forecasts to Bloomberg expect the Fed to keep policy rates unchanged []. However, the market is pricing in a meaningful 30% probability that the Fed will raise rates as oil prices have been increasing again and low jobless claims point to stability in the labor market. We do not think the majority of the committee, including the Chair, would want to hike after a very soft core CPI reading in June.” Future action: 25bp cuts in Oct, Dec, Jan

Some key analyst commentary from July FOMC previews, along with the analyst's view on the rate outlook, listed in descending of order from most hikes to most cuts through end-2027 (the median is roughly -50bp, ie two more cuts in this cycle). For more commentary see our Fed Preview with analyst updates Here

• BofA : “With markets now pricing nearly 10bp of hikes in July, Chair Warsh faces a difficult choice. Not hiking could challenge the Fed's credibility on inflation. But raising rates would go against his framework of looking through supply shocks.” Future action: 25bp hikes in Sep, Oct, Dec then hold through 2028
• Deutsche: Our baseline remains that the Fed raises rates by 50bps this year (25bps hikes in September and December). There are two-sided risks to this view. A July rate hike and even a full reversal of last year’s 75bp reduction are quite possible. On the dovish side, a replay of summer labor weakness, a string of softer inflation prints, or a sharp tightening of financial conditions could delay or forestall hikes."
• JPMorgan: “There are sound arguments for hiking and holding [] with the difference usually coming down to one’s inflation forecast. We think the strongest case for holding [] is that a hike would send a confusing signal about how the Fed responds to data. The Committee voted unanimously at the last meeting to keep rates on hold. Since then, we’ve had one inflation reading, and the core measure was the softest in years. Eschewing forward guidance is uncontroversial in contemporary thinking about monetary policy provided the public has an understanding about how policy reacts to developments. No forward guidance combined with an unstable reaction function would be concerning.” Future action: Next move: hike in Q3 2027
• Barclays: “the latest economic data and recent comments from Fed speakers reinforced our expectation that the FOMC will remain on hold [in July], with the center of the committee appearing content to wait for additional inflation data, particularly following June's softer-than-expected CPI and PPI reports. At the same time, policymakers continue to view more persistent inflation pressures as the dominant risk, leaving the door open to additional tightening should disinflation fail to resume over the next several months.” Future action: Hold through end-2027, 25bp cut sometime beyond that
• Morgan Stanley: “Despite the rebound in oil prices, other data points to patience. Employment growth has slowed and evidence of disinflation has emerged. The case to hike in June was stronger, in our view. That said, at some point the Fed will run out of patience and repeated commitments to achieve price stability need to be followed by action. We may have misjudged the reaction function.” Future action: 25bp cuts in Q1 and Q2 2027
• Wells Fargo: “We expect Kevin Warsh's second meeting as FOMC Chair to be a punt to September as the Committee awaits more data that either confirm or dispel their hawkish leanings.” Future action: Hold through 2027.

• As for more timely indicators, the S&P Global composite PMI was stronger than expected in Friday’s preliminary July release at 53.6 for an eight-month high.
• From the press release (link): "US business activity growth accelerated at the start of the third quarter, according to provisional PMI survey data, reaching an eight-month high and prompting firms to add staff for the first time in three months. Business confidence in the year-ahead outlook also rose to an eight-month high. However, the improvement was confined to services, while manufacturing growth slowed sharply."
• However, this could have been boosted by the FIFA World Cup and possibly USA 250 anniversary activities according to S&P Global. We suspect the final July update along with ISM surveys due early August will provide a more complete look at early implications from the rise in energy prices.