Fed Set for Hawkish Hold on Oct 28 as Markets Price a December Hike
The FOMC is expected to hold at 3.75%-4.00% on October 28, but futures put roughly 72%-80% odds on a further hike in December as CPI runs at 3.7% and the oil shock feeds through.
The Federal Reserve concludes its policy meeting on October 28 with markets overwhelmingly expecting a hold at the current 3.75%-4.00% target range. The more consequential signal is further out: fed funds futures imply roughly 72% to 80% probability of an additional hike in December, a stark reversal from the easing path priced earlier in the year.
The hawkish repricing follows the September 17 move in which the Fed lifted the upper bound of its target range to 4.0% from 3.75%, joining the ECB and Bank of Japan in tightening. U.S. CPI at 3.7% year-over-year underscores that inflation pressures remain persistent, and the energy shock gives policymakers little room to pause for long.
Chair Kevin Warsh's press conference after the October decision will be scrutinised for guidance on the pace of further tightening. Q3 GDP and PCE inflation data land Thursday, and September PCE follows on October 29 — a dense catalyst window that leaves rate-sensitive assets exposed into month-end.
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