The July 29 FOMC decision: an expected hold, confirmed

The Federal Open Market Committee voted unanimously to maintain the fed funds target range at 3.50–3.75%, in line with market expectations. This marks the third consecutive meeting without action since Chairman Kevin Warsh triggered a hawkish shock at the February 2026 FOMC, raising rates from 3.25% to 3.50%.

The official statement noted that « the Committee remains attentive to inflation risks while observing a gradual easing in labour market conditions. » The language retains the option of an additional hike by December 2026 — 7 of 18 members still anticipate one — but implied probability of action in September has fallen to 18% from 34% before the meeting.

For wealth management clients, this pause confirms the “higher for longer” scenario: elevated but stable policy rates that offer attractive bond carry without the immediate risk of further hikes. This is precisely the environment in which intermediate-maturity Treasuries (3–7 years) deliver the best risk-adjusted return.

US disinflation: progress made, but the journey continues

Headline CPI inflation declined to 3.5% year-on-year in June 2026, down from 4.2% in May. This 70 basis point monthly drop primarily reflects the normalisation of energy prices following May’s Strait of Hormuz tensions, together with modest deflation in durable goods.

Services inflation — the most persistent component and the one most closely watched by the Fed — remains elevated at 4.1%. The Owner’s Equivalent Rent (OER), which represents 30% of the CPI basket, is receding only very gradually. Labour markets remain tight, with unemployment at 4.2% and non-farm payrolls still adding +142,000 jobs in June.

The disinflation trajectory is therefore real but insufficient to justify a rate cut in 2026. Economists’ consensus before the meeting placed the first cut in Q1 2027 at the earliest — an outlook Warsh indirectly validated by stating that the Fed would need “several additional months of favourable data” before acting.

The winners of the pause: gold, silver and bonds

The market reaction to the rate hold was instructive. Gold climbed steadily throughout the session to reach $4,180/oz — a 1.8% gain that brings the July-to-date performance to approximately +1.5%. Goldman Sachs maintains its $4,900/oz target for end-2026, supported by central bank buying from emerging market economies and by declining US real yields.

Silver delivered the session’s standout performance with a +5% surge. This amplified move relative to gold reflects two concurrent dynamics: the typical gold/silver ratio compression during periods of moderate risk-on sentiment, and sustained industrial demand driven by the ongoing deployment of renewable energy infrastructure (photovoltaics).

On the bond side, the 10-year US Treasury yield retreated to 4.35% (from 4.50% before the June 17 meeting), releasing a price gain on existing positions. Inflation-linked bonds (OATi in France, TIPS in the US) benefit doubly: from lower nominal rates and from the persistence of real inflation at 3.5%.

The residual risk: oil prices and geopolitics

The sharp Brent rebound (+4% to $88/bbl) tempers the post-FOMC optimism. This recovery followed an attack attributed to Iran targeting US forces in the eastern Mediterranean, reigniting concerns about the security of the Strait of Hormuz. After falling to $74/bbl in late June as oil flows normalised, Brent is back at levels that exert latent upward pressure on transport and energy inflation.

This risk is ambivalent for portfolios. On one hand, Brent sustainably above $90/bbl could reopen the debate around one additional Fed hike by December 2026 — which would penalise longer-duration bonds. On the other, a major geopolitical shock would reinforce safe-haven flows into gold and short-dated Treasuries, providing a natural hedge within the current allocation.

Our base scenario keeps Brent between $80 and $90/bbl over summer 2026, without major escalation. Put options on European cyclicals prepared in June remain active as a safety net, ready to be triggered if tensions exceed our alert threshold.

Portfolio implications for wealth management

The July 29 FOMC decision validates the main orientations established at our Week 27 Investment Committee meeting (June 22, 2026). The Tactical Risk-Off regime at 6.5/10 remains appropriate given residual geopolitical uncertainties and the resistance zone in US equities around 7,200–7,400 on the S&P 500.

Three tactical adjustments are worth examining following the session:

1. Confirm and maintain gold overweight: The technical momentum is favourable. Gold is forming a bullish continuation pattern above $4,000/oz, with Goldman Sachs’ next target at $4,900. The 10% gold/portfolio ratio can be maintained via iShares Physical Gold (IGLN) or direct exposure through a securities account.

2. Modestly extend duration on Treasuries: With the 10-year UST back at 4.35%, the entry point becomes attractive again for 5–10-year maturities. The iShares 3-7Y Treasury Bond ETF (IEI) can absorb a portion of the cash released from the Tech US reduction executed in June.

3. Maintain put options on European cyclicals: Brent’s rebound to $88/bbl and persistent geopolitical risk justify keeping the hedges on EU cyclicals prepared on June 22. Review is scheduled for August 1 absent any major development on the Iranian front.