Traders swing to an October Fed hold after soft jobs data

A December rise is priced at 75%, so traders expect October's pause to be short.

In one line: The Fed keeps rates unchanged at its October meeting, an outcome the 83% hold price still underrates, and any rise waits for December.

Traders on Polymarket now price an October Fed hold at 83%, after the New York Times reported on 2 Oct that the odds of a rate change fell on a softer jobs report and strong signalling from bank officials. The same day wallst_247, a financial news site, reported that August inflation came in well below forecasts, though it noted that a quiet change in how the government counts service prices may deserve credit for the reading.

The hold contract rose 8.0 points in the last 24 hours and 47 points over the 7 days, from 36% on 26 Sep. It touched a low of 28% on 28 Sep and a high of 87% on 2 Oct before easing 4 points. A rise of 25 basis points, a quarter of a percentage point, is priced at 18%. Every cut and any 50-basis-point rise sit at 0%. Kalshi's matching contracts show 80% for a hold and 19% for a rise, so two separate books agree. For December, Polymarket prices a 25-basis-point rise at 75%.

The reporting and the price agree on October and point the other way for the months after it. Bond yields hit a 23-year high on 2 Oct as oil topped $100, investing_us, a financial news site, reported. TLT, a long-Treasury fund that falls as long yields rise, lost 0.58% that session, while USO, an oil fund, rose 2.65%. Oil above $100 feeds into consumer prices, the pressure a December rise would answer. That is why traders push the rise to December instead of dropping it. The weak spot in the soft-data case is the August figure itself, because a flattering measurement change would leave the inflation underneath hotter than the headline.

The Fed holds its range in October, and the 83% price still underrates that. A soft jobs report and officials' own signals give the committee every reason to wait a meeting. A hold leaves the cost of short-term borrowing where it is until the Fed next meets. The other side's best case is an inflation reading above forecast before 29 Oct, with oil still above $100, which would make the 18% price for a rise right. The call is wrong if the Fed lifts the upper bound of its range at the October meeting, which the contract settles on 29 Oct.

Sources