Fed's Jefferson signals October rate pause as rate hike odds fall

What happened

Federal Reserve Board Governor Philip Jefferson signaled that the FOMC may hold rates steady at its October meeting, saying he sees no urgency for further hikes even as he supported the September decision. He said any future policy adjustments should follow a careful read of the data, the outlook and the balance of risks, and that officials may need more time to form their own judgment.

Jefferson's comments echoed New York Fed President John Williams, who earlier said he sees no urgency to raise rates further. Minneapolis Fed President Neel Kashkari told Reuters he is open-minded about the October decision, though he expects further increases heading into the new year.

Crypto traders cut their bets on an October Fed rate hike after those remarks. Polymarket data shows a 77% chance that the Fed holds rates steady and a 23% chance that it hikes, down from a high of 70% as of last week.

Why it matters

Rate expectations drive how traders price risk across crypto and stocks, and the Fed's next policy meeting is scheduled for October 28. Short-term rate markets had nearly fully priced in a second hike before the latest labor data.

The September employment report moved expectations the other way. The US economy added just 29,000 jobs, well below the 90,000 jobs that economists surveyed by Bloomberg predicted, and the unemployment rate rose to 4.2%.

The print marks the third weakest jobs report of 2026. A softer labor market gives officials room to wait, while Kashkari has warned that inflation still needs more rate increases.

What the data shows

Polymarket shows a 77% chance the Fed holds rates steady and a 23% chance of a hike.

The September jobs gain of 29,000 came in below the 89,000 figure cited by The Kobeissi Letter and the 90,000 jobs Bloomberg's survey of economists predicted.

The unemployment rate rose to 4.2%, above the 4.1% economists had expected. August's job gains were revised down by 29,000 jobs, to 133,000 from 162,000.

Bitcoin continued trading just under $87,000 after the data. The Nasdaq gained 1.2% in early trading, the 10 year Treasury yield dropped to 5.17%, and gold prices rose more than 1%.

Background

The Fed made the first rate hike since 2023 at the September FOMC meeting, citing inflation concerns. Following Williams' statement and soft PCE inflation data, Goldman Sachs pushed its second Fed rate hike forecast to December and said additional rate increases may be unnecessary.

What is still unclear

• Neel Kashkari said he does not have a strong view on whether the next hike should happen in October, and he has continued to raise concerns about rising inflation.
• The weak jobs report raises questions about the Fed's recent policy moves, and investors are watching to see whether hiring plans have stalled as rates have climbed.

Questions readers ask