The Financial world is on its heel due to the unsettling and confusing rate cuts expectations.

For months, traders had pegged September as the moment the Federal Reserve would finally ease its foot off the monetary brake. Now, that certainty is unraveling, replaced by a fog of doubt fueled by sturdy jobs data and the murky fallout of President Trump’s tariffs. Yields are stuck in a restless limbo, and the upcoming Consumer Price Index (CPI) report on July 15 could either light a fuse under Treasury prices or snuff out the last embers of rate-cut hopes. Amid this tension, Fed Governor Christopher Waller is stirring the pot, doubling down on a call for a July cut that’s splitting the central bank’s ranks.

The stakes couldn’t be higher. Treasuries just notched their best first half in five years, but that rally feels like a distant memory as traders brace for a pivotal week. “The CPI could be the make-or-break moment for the Fed’s direction—and the market’s mood—through year-end,” says Zachary Griffiths, head of investment-grade and macroeconomic strategy at CreditSights. With a packed economic calendar ahead, here’s what’s on the radar:

What to Watch: Near-Term Financial Calendar

Economic Data:

Fed Calendar:

July 15

1. Empire Manufacturing

2. Consumer Price Index

3. Real Average Hourly Earnings

Vice Chair for Supervision Michelle Bowman;

Governor Michael Barr;

Richmond Fed President Tom Barkin;

Boston Fed President Susan Collins;

Dallas Fed President Lorie Logan

July 16

1. MBA Mortgage Applications

2. Producer Price Index

3. NY Fed Services Business Activity

4. Manufacturing (SIC) Production

5. Capacity Utilization Capacity Utilization

6. Fed Beige Book

Richmond Fed President Tom Barkin;

Cleveland Fed President Beth Hammack;

Governor Michael Barr;

New York Fed President John Williams

July 17

1. Retail Sales

2. Import/Export Price Indexes

3. Initial Jobless Claims

4. Philadelphia Fed Business Outlook

5. Business Inventories

6. NAHB Housing Price Index

7. Net Long-Term TIC Flows

Governor Adriana Kugler;

San Francisco Fed President Mary Daly;

Governor Lisa Cook;

Governor Christopher Waller

July 18

1. University of Michigan Sentiment and Inflation Expectations

Bond Traders’ Cold Feet

Bond traders, the market’s self-appointed soothsayers, are losing faith in a September rate cut. A flurry of strong jobs numbers in early July has upended the narrative of an economy crying out for relief. The odds of a July cut? Effectively zero. September? Down to a shaky 70% from a near-sure thing in late June. “The job market’s resilience and frothy risk assets don’t scream ‘cut now,’” says Tracy Chen, portfolio manager at Brandywine Global Investment Management. “I don’t see how the Fed justifies easing in September.”

Tuesday’s CPI release looms large. Economists polled by Bloomberg expect core inflation to hit 2.9% annually in June—the hottest since February. A sticky reading, especially if tariffs start biting, could cement traders’ doubts. Yields on two-year Treasuries, the Fed’s trusty shadow, have been yo-yoing between 3.7% and 4% since May, while volatility gauges have slumped to a three-year low. It’s the calm before the storm—or perhaps just a market too paralyzed to pick a direction.

Waller’s July Crusade

Enter Christopher Waller, the Fed governor with a flair for shaking things up. Last Thursday, he doubled down on a provocative pitch: cut rates in July. “We’re just too tight,” he declared, brushing off tariff-driven inflation as a fleeting blip. “It’s not political,” he insisted, though his timing—amid Trump’s relentless prodding for lower rates—raises eyebrows. With his name in the mix to succeed Jerome Powell next May, Waller’s not shy about flexing his influence.

He’s not alone. Fed Governor Michelle Bowman echoes his urgency, but the doves face a skeptical flock. St. Louis Fed President Alberto Musalem isn’t sold, warning that tariff effects could linger: “It’s going to take time to see what people are actually paying.” San Francisco’s Mary Daly, a cautious optimist, pegs September as the soonest plausible move, projecting two cuts by year-end. Powell himself? He’s playing the long game, citing a robust economy as reason to wait out the tariff haze.

Tariffs: The X-Factor

Trump’s tariffs are the wild card no one can quite read. Delayed until August 1, they’ve left the Fed—and the market—grasping at straws. Powell has preached patience, noting, “We don’t know what will be tariffed, from where, or for how long.” Waller shrugs it off: “We’re not seeing much tariff inflation yet.” But if Tuesday’s CPI hints at brewing price pressures, that debate could heat up fast. “We should see the tariff war’s fingerprints in the data soon,” Chen warns, eyeing a steeper yield curve if inflation rears its head.

Market in the Balance

For now, the bond market’s stuck in neutral. Traders have unwound bullish bets, leaving two-year yields range-bound and volatility muted. A hotter-than-expected CPI could jolt yields upward, especially at the longer end, as Griffiths predicts: “Tariff pressures might force a repricing of Fed policy, pushing rates higher in a bearish flattener.” A tame report, though, could revive September cut chatter, nudging yields down—albeit with the Fed’s internal rift keeping gains in check.

John Lloyd, global head of multi-sector credit at Janus Henderson, sees flexibility in the outlook. “We’ve got two cuts priced in by December,” he says. “If one slips, it’s likely just punted to Q1 next year.” Last week’s solid demand at 10- and 30-year Treasury auctions offers a buffer—buyers are poised to pounce if a selloff kicks in.

The Road Ahead

The Fed’s July 29-30 meeting is shaping up as a showdown. Bond traders are digging in, skeptical of a September pivot, while Waller’s July gambit tests the central bank’s unity. This week’s CPI will set the tone, but the barrage of data—from retail sales to housing starts—will keep markets on edge. Tariffs, meanwhile, loom like a storm cloud, their impact uncertain but undeniable.

For now, Treasuries teeter on a knife’s edge. A single data point could tip the scales, either locking in the market’s best first half in years or unraveling it in a flash. As Griffiths puts it, “It’s all about what the numbers tell us next.”