For most of 2026, the debate on Wall Street has centered on when the Federal Reserve might cut interest rates again.

Ed Yardeni just flipped that conversation on its head.

The veteran strategist and president of Yardeni Research is now openly predicting that the Federal Reserve could raise rates as soon as its July 29 meeting, a scenario that remains almost unthinkable in financial markets.

The call makes Yardeni one of the first major Wall Street economists to explicitly forecast a July rate hike rather than merely warning about upside inflation risks.

“Unlike the consensus, which doesn’t expect a rate hike until late this year at the earliest, we see the FOMC raising the federal funds rate in July,” Yardeni said.

Prediction markets show just how isolated Yardeni’s view remains. According to market-implied probabilities tracked by betting platforms, the odds of a July rate hike are roughly 5%, meaning traders overwhelmingly expect the Fed to leave rates unchanged. A $10 wager on a July hike would return roughly $170 if the event occurs. That gap between market pricing and Yardeni’s forecast highlights how far outside the consensus his call sits.

So why does Yardeni think the Fed will hike? He reads the April meeting minutes, the last under Jerome Powell, as already hawkish beneath the surface. He expects Kevin Warsh, who chairs his first meeting on June 17, to make the turn official. Yardeni expects the Fed to abandon its easing bias at the June meeting and pivot toward a tightening stance.

“I think it’s pretty clear that the easing bias will be dropped at the June statement,” Yardeni said.

Yardeni’s firm sees the combination of a resilient economy, a firm labor market and rising inflation as creating the conditions for a rate increase just one meeting later. During a webcast on Monday, Yardeni indicated that inflation risks are rising while employment concerns have diminished.

The trigger is oil. The war that opened in late February has kept crude near $90 a barrel and pushed the Strait of Hormuz to the center of every energy forecast. April headline inflation ran at 3.8% year over year as energy costs fed through. Unemployment sat at 4.3% with two straight months of stronger-than-expected hiring.

Yardeni’s deeper worry is that an energy shock does not stay contained. “They’ve got not just an energy problem but an energy problem that has the potential to spread into a broader list of prices.”

“In terms of their credibility, and the fact that they’re still wounded by their lack of credibility in responding fast enough to the inflation of 2021, early 2022, they might very well do a quarter point [in July]” Yardeni said.

He is early but not alone. Fed Governor Christopher Waller said in May that he could no longer rule out hikes if inflation failed to ease, pointing to the war’s energy shock.

Despite Yardeni forecasting a rate hike, he still sees the S&P 500 – as tracked by the SPDR S&P 500 ETF Trust (SPY) – climbing to 8,250 by year-end. “I know some people find it a little odd that we’re bullish on the stock market going to 8,250 and yet arguing that the Fed might actually tighten,” Yardeni said.

His answer is what he calls “fabulous earnings momentum.” First quarter earnings growth is closing near 19% and analysts keep raising their 2027 estimates. A quarter point, in that frame, is noise. “What difference does a quarter or 50 basis points make? The economy will continue to show its resilience,” Yardeni said.