The likelihood of a Federal Reserve rate hike on October 28 has declined sharply to 18.3%, according to the CME FedWatch tool, following softer-than-expected economic data. The probability of a rate cut sits at 0%, making a policy hold the most probable outcome for this month's meeting.
Fed hike odds stood at 37.6% on September 30 but have since fallen as employment and inflation reports disappointed expectations. In September, employers added just 29,000 jobs against forecasts near 90,000. Meanwhile, the core Personal Consumption Expenditures price index, the Federal Reserve's preferred inflation measure, rose 0.2% in August, below analyst projections.
Signals from top Fed officials have also suggested no immediate urgency for further action. Fed Vice Chair Philip Jefferson and New York Fed President John Williams both indicated the central bank is not rushing to move again.
December Hike Remains in Play
A hold in October would not eliminate rate increase risks entirely. The Federal Reserve raised rates in September, its first hike since 2023, and Goldman Sachs now expects another increase in December. Most Federal Open Market Committee participants viewed another 2026 hike as likely appropriate, according to September meeting minutes.
Energy costs present an additional complication. Oil prices climbed approximately 14% during September, reaching above $96 a barrel by month-end, adding to inflationary pressure.
Implications for Bitcoin and Markets
Bitcoin traders reacted immediately to the weak jobs report, with approximately $27.5 million in short positions liquidated within an hour, according to CoinGlass data.
The broader market picture remains uncertain despite reduced near-term hike expectations. The 10-year Treasury yield touched 5.342% on October 1, its highest level since early 2002. Analyst Benjamin Cowen suggests bond traders partly fear the Fed will tighten too little rather than too much, with this anxiety potentially peaking around the October 28 meeting date.
A hold in October will test whether market participants interpret a delayed hike as relief or as a signal of larger economic pressures ahead. The October 14 inflation data release may prove more consequential than the Fed's October decision itself, given that 16 of 18 Fed officials are projecting another rate increase.
