Pause?
One week ago, markets gave an October hike about a 69% chance. This morning, CME FedWatch has it at 24%, and Polymarket shows "No Change" climbing while "25 bps increase" falls off a cliff. A cut is basically priced at zero.
Odds for the Oct 28 meeting (CME FedWatch, as of this morning):
• Hold at 3.75–4.00%: 75.9%
• Hike to 4.00–4.25%: 24.1%
What changed since the Sept 16 hike:
1️⃣ The Fed said "no urgency." NY Fed President Williams signaled the case for more tightening has weakened and that about one more hike is needed this year. Hike odds fell from ~75% to ~49% in a single day.
2️⃣ Labor data softened. Weak JOLTS job openings added to the case for patience. Wage growth has also cooled to around 3% from roughly 4% at the start of the year.
3️⃣ Politics. The Nov 3 midterms make an October move more contentious, which leaves December as the more natural window.
Still, "hold" doesn't mean "done." Inflation is still above target, and 16 of 18 FOMC participants projected a year-end rate above today's range. A December hike is very much alive.
Catalysts before Oct 28:
• Today's September jobs report. A weaker than expected unemployment print can force thr Fed into a cut.
• CPI on Oct 14. Oil and government spending are the levers to be pulled, and neither has prospectas to change.
The odds of stagflation are still low, but are increasing.
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