Fed Hike Probability Drops to 18% as Markets Brace for Rate Pause

The likelihood of a Federal Reserve rate hike on October 28 has declined to 18.3%, according to the CME FedWatch tool, following softer employment and inflation figures. The probability of a cut remains at zero, making a hold the baseline expectation.

A pause would not necessarily bring a sense of relief. The Fed increased rates in September for the first time since 2023, and another move in December is still a possibility.

Why Are Hike Odds Falling While Cuts Remain Unlikely?

FedWatch, which converts futures pricing into probability estimates, showed hike odds at 37.6% on September 30. By October 8, those figures had dropped to roughly 18%. This followed September payroll data showing just 29,000 jobs added, well short of the nearly 90,000 that had been forecast.

Inflation data also came in below expectations. The core Personal Consumption Expenditures (PCE) price index, the Fed's preferred measure, increased by 0.2% in August, missing projections.

Fed Vice Chair Philip Jefferson and New York Fed President John Williams have indicated there is no urgency to act again.

Rate cuts appear distant for another reason. According to the September meeting minutes, most Federal Open Market Committee (FOMC) participants viewed another rate increase in 2026 as likely appropriate.

Energy costs add further pressure. Yahoo reported that oil rose approximately 14% in the month through September 29, reaching above $96 per barrel.

Could a Hold Benefit Bitcoin if Yields Remain Elevated?

A pause might eliminate one risk factor for the Bitcoin price. However, the potential hike has simply shifted to December, where Goldman Sachs now anticipates it.

Bitcoin surged within minutes of the weak jobs report, liquidating roughly $27.5 million in short positions within an hour, according to CoinGlass data.

Yields complicate the outlook. The 10-year Treasury yield reached 5.342% on October 1, its highest level since early 2002.

Analyst Benjamin Cowen suggests that bond traders are partly concerned the Fed might not tighten enough, which is driving yields higher. He predicts fear will peak around the October 28 meeting.

A hold thus tests whether traders interpret a delayed hike as a positive or as a larger burden down the line. With 16 of 18 Fed officials forecasting another increase, October 14 inflation data may have more impact than the decision itself.