Persistent inflation pressures from the May 2026 CPI report, which showed a 4.2% year-over-year rise driven by a 23.5% surge in energy costs amid Middle East tensions, have anchored trader expectations for the July 28-29 FOMC meeting. With the federal funds rate steady at 3.50%-3.75% following the June decision under new Chair Kevin Warsh, market-implied odds heavily favor no change at 79.5%, reflecting caution as June CPI data arrives July 14. Modest 19.4% pricing for a 25 basis point hike incorporates dot-plot signals that nine officials anticipate at least one increase this year, while negligible probabilities for cuts underscore limited downside risks given resilient labor markets and elevated Treasury yields. Geopolitical and data-dependent factors remain key swing elements before resolution.