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ZEC $1,054 Fed may pause in October while December hike odds stay high
Prediction markets put a hold at the October 27, 28 meeting as the clear favorite, while pricing still points to a December increase.
Key takeaways
- A pause is favored. Polymarket puts the odds of holding rates steady in October at 87%, with a hike at 14%.
- December is different. Markets price an 89% chance of a 25-basis-point December hike to 4.00%, 4.25%.
- Inflation is above target. Annual inflation rose to 3.7% in September from 3.4% in August, above the Fed's 2% goal.
What happened
Prediction markets now favor the Federal Reserve leaving interest rates unchanged at its October 27, 28 meeting. Polymarket figures put the odds of a hold at 87% and a 25-basis-point increase at 14%, with less than a 1% chance assigned to a cut or a larger increase.
Coinpedia reported similar pricing, with an 85% chance of a hold and hike odds near 15%. It also said markets price an 89% probability of a 25-basis-point December hike that would lift the benchmark range to 4.00%, 4.25%.
The shift follows comments from officials. San Francisco Fed President Mary Daly said on October 14 that further hikes could be needed but that there was no urgency to act at the upcoming meeting. Fed Chair Kevin Warsh, speaking in Bangkok on October 16, said he does not prejudge individual meetings.
Why it matters
Rate expectations feed directly into how traders price risk across crypto and other markets. A pause would not end the tightening debate, because pricing still points to a December move.
Inflation remains the main argument for another hike. The latest CPI report showed annual inflation at 3.7% in September, up from 3.4% in August, and core inflation also rose. Coinpedia noted oil prices above $106 a barrel could keep price pressures elevated.
The timing of the October meeting may also matter. Coinpedia said the Fed may prefer to avoid a major rate change just before the November 3 midterm elections.
Background
The Fed raised its benchmark rate by 25 basis points in September, taking the target range to 3.75%, 4.00%, its first hike in more than three years. After that move, investors expected another increase in October.
Expectations eased after New York Fed President John Williams said there was no urgency to raise rates again immediately. Coinpedia said October hike odds fell to 44% at that point.
Polymarket pricing moved again after Warsh declined to signal the committee's next step. Warsh said, "I don't believe in saying now what I might do at the meetings that we have in the balance of this year."
What is still unclear
- The two reports give slightly different October hold odds, at 87% and 85%, and hike odds of 14% and 15%.
- Polymarket odds can shift quickly with new inflation or economic data, so the current pricing may not hold before the meeting.
Questions readers ask
What are the odds of a Fed rate hike in October?
Polymarket puts the chance of a 25-basis-point October hike at 14%, while the odds of holding rates steady stand at 87%. Coinpedia reported hike odds near 15% and hold odds of 85%.
Will the Fed raise rates in December?
Markets price an 89% probability of a 25-basis-point December hike, which would lift the target range to 4.00%, 4.25%, according to Coinpedia.
When is the next FOMC meeting?
The October meeting is scheduled for October 27, 28, just days before the November 3 midterm elections.
What did Kevin Warsh say about the next rate decision?
Warsh said he does not prejudge individual meetings and does not believe in saying now what he might do at the meetings left this year.
