Interest rates in the US are expected to rise by 0.25% when the Federal Open Markets Committee concludes its monthly meeting at 7.30 pm.
In June, the decision was unanimous but, points out economist James Knightley at ING, "there was hawkish messaging in the accompanying press conference and updated Fed forecasts, signalling a broad consensus behind the idea of two more rate rises later in the year".
Fed chair Jerome Powell stressed that varied lags in monetary policy meant that the decision should be interpreted as a slowing in the pace of rate hikes rather than an actual pause.
"While inflation is moderating, it is still far too high and with the jobs market remaining very tight, the Fed can’t take any chances," Knightley says.
US consumer price inflation fell to 3.0% in June from 4.0% in May, while core inflation decreased to 4.8% from 5.3%.
The commentary from Fed speakers since then remains consistent with this messaging, with broad support for another 25bps rate rise at next week's meeting, taking the Fed funds range to 5.25-5.5%.
For ING there is a "70% probability" on the 25bps hike scenario together with commentary from Powell and co emphasising the need to be attentive to inflation risks, that growth needs to slow below trend, and that further rate hikes “may be appropriate”.
"We would then say there is a 25% chance of a more dovish 25bp hike, signalling a likely peak for rates, while the 0bp and 50bp outcomes each have a 2.5% chance of materialising."
Rabobank was another bank expecting the Fed to hike 25bps.
"Despite recent declines, we expect a rebound in headline CPI inflation due to base effects in coming months," said Philip Marey, senior US strategist at Rabobank. "In contrast, we expect a gradual decline in core inflation, but it is likely to remain elevated for the remainder of the year."
"Therefore we stick to our view that the Fed is not going to pivot, i.e. cut rates, this year.
"We also think it is premature to declare a soft landing and we still see the US economy deteriorate in the second half of the year.
"Consequently, we continue to have our doubts about a second rate hike after July, as long as Powell clings to a more moderate pace of the hiking cycle."