Fed likely to hold rates in October, but December hike odds rise

The Federal Reserve is widely expected to hold interest rates steady at its October 27–28 meeting, with market odds for a hike falling to approximately 15% following recent remarks from Fed Chair Kevin Warsh. Warsh, speaking at a fireside chat in Bangkok, declined to signal the central bank’s next move, stating he did not believe in predicting decisions made at upcoming meetings.

The shift in expectations follows comments from New York Fed President John Williams, who noted there was no urgency to raise rates immediately. The Fed had previously raised its benchmark rate by 25 basis points in September to a range of 3.75%–4.00%, marking the first increase in more than three years. Officials may also prefer to avoid a major rate change just days before the November 3 midterm elections to minimize political pressure.

Despite the likely pause in October, markets have priced in an 89% probability of a 25-basis-point rate hike in December, which would lift the target range to 4.00%–4.25%. This outlook is driven by rising inflation, which reached 3.7% in September, and oil prices climbing above $106 a barrel amid Middle East tensions.

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