Recent inflation data, including June CPI at 3.5% year-over-year with core at 2.6%, combined with energy price volatility from Middle East tensions, have shifted trader sentiment against near-term Fed rate cuts. The central bank held the federal funds rate steady at 3.50%-3.75% in its July meeting by a 9-3 vote, with dissenters favoring a hike amid elevated price pressures above the 2% target. Markets now price in potential 2026 rate increases rather than the cuts anticipated earlier in the year, reflecting resilient growth and stable unemployment near 4.1%. Key upcoming catalysts include the August 12 CPI release and the September FOMC meeting, where updated projections could further influence policy expectations and implied probabilities.