October's Fed Meeting Is a Coin Toss on Prediction Markets

Prediction markets now price the October Federal Reserve meeting as the closest call of the year. Kalshi puts a roughly 56% chance on a quarter-point hike on Oct 28 against about 42% on a hold, and Polymarket and CME fed-funds futures sit at nearly the same split. That is the market refusing to follow the dot plot all the way.

The committee's unanimous hike on Sept 16, its first since 2023, came with a projection that still leans hawkish. Sixteen of 18 participants expect at least one more quarter-point move this year, and the median year-end funds rate sits at 4.1%, up from 3.8% in the June projections. Per Reuters, an explicit one-more-hike bias is baked into the summary of economic projections.

Yet the market is giving real weight to a hold, and two scheduled data releases get to settle it. Weekly initial claims print Thursday, Sept 24. The prior week's reading, 196,000, came in below the 208,000 forecast and kept the four-week average at 203,250, pointing to a labor market still firm enough to let the Fed move. August PCE, the Fed's preferred inflation gauge, lands Wednesday, Sept 30, alongside the third estimate of Q2 GDP; July headline PCE ran 3.7% year over year with core at 3.3%, both still well above target.

The inflation signal behind the latest CPI print is energy-led. August CPI held at 3.4% year over year with core cooling to 2.4%, but gasoline rose 3.9% month over month and the energy index is up 16.3% year over year, per BLS data. Elevated crude, with Brent back above $97, is the live risk to the base case: further supply-side pressure would flow straight into headline PCE and harden the committee's resolve.

For how the Fed policy framework is framed, see our Fed policy coverage. One-line outlook: a soft August PCE and a claims print near or below 200,000 give the doves cover to hold on Oct 28; a hot PCE all but seals the hike, and the 10-year push back above 5.00% would be the first confirmation.

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