A television station broadcasts Kevin Warsh, chairman of the US Federal Reserve, speaking after a Federal Open Market Committee (FOMC) meeting as a trader works on the floor of the New York Stock Exchange (NYSE) in New York, US, on Wednesday, Sept. 16, 2026.
Michael Nagle | Bloomberg | Getty Images
Following a softer-than-expected September employment report, investors now view the likelihood of the Federal Reserve raising interest rates again in October as extremely remote.
Analysis from CME’s FedWatch tool, derived from trading in 30-day interest rate futures, currently shows only a 17% probability of a quarter-percentage-point rate increase. In comparison, one week prior, the odds hovered near 36%. On the prediction market platform Kalshi, the probability of an October hike has dropped to 18%, down from nearly 70% a week ago.
The U.S. economy added only 29,000 jobs in September, missing forecasts for an increase of more than 80,000. A cooling labor market may lead the Fed to reassess its approach to balancing its dual mandate of full employment and price stability, following its decision in September to hike rates in an effort to control inflation that has stayed above target for five years.
The odds of an October increase also declined mid-week after the release of the personal consumption expenditures price index, the central bank’s favored inflation measure, revealed calmer-than-anticipated pricing data. Core prices, which exclude food and energy, climbed 3% in August, underperforming the consensus forecast of a 3.3% increase.
“This report strengthens the case for the Federal Reserve to remain patient,” said Adam Schickling, a senior economist at Vanguard. “The labor market has not deteriorated sharply, but there is also little evidence that it has meaningfully strengthened, giving policymakers reason to wait for additional data.”
Despite the diminished odds of an October move, market participants continue to expect the central bank to increase rates in December.
On FedWatch, the probability of a December hike stands above 75%, while Kalshi indicates 65% odds.
The Federal Reserve is scheduled to disclose its next interest rate decision at the end of a two-day policy session on Oct. 28.
— CNBC’s Michelle Fox contributed reporting
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