Fed will likely hold rates at July meeting and through 2026, but Iran and tariffs pose upside risks – Natixis - KITCO

What the report says

Kitco News reported that Natixis economists expect the Federal Reserve to leave interest rates unchanged at its July policy meeting next week and to maintain that stance for an extended period, potentially through 2026. In a preview cited by Kitco, Christopher Hodge and Selin Aker said recent economic releases have given the Federal Open Market Committee room to wait rather than adjust policy immediately.

According to the Natixis analysis, the limited data since the June Fed meeting tilted somewhat dovish. June payroll growth slowed to 57,000 after averaging 164,000 over the prior three months, while a drop in labor force participation among prime-age workers was flagged as a concern if it persists. Inflation figures were also softer: headline CPI fell 0.4% on the month, core CPI was flat, and related CPI and PPI components pointed to a June PCE inflation reading below the Fed’s 2% target.

Natixis still sees the Fed’s internal messaging as mixed, with several officials worried about inflation. The economists expect a hold in July, though not necessarily a unanimous one, noting Dallas Fed President Lorie Logan as a likely dissenter and Cleveland Fed President Beth Hammack or Minneapolis Fed President Neel Kashkari as possible additional dissenters.

The outlook matters for financial markets because rate expectations influence currencies, bonds, equities, commodities and borrowing costs. Natixis said its base case is an extended pause as domestic inflation pressures cool, but it identified renewed tariffs and higher energy prices tied to tensions involving Iran as upside risks that could force the Fed to reconsider.