Markets are ditching bets on a US benchmark interest rate hike this month. On prediction platform Polymarket, the probability of the Fed raising rates in October dropped to 23% - down sharply from around 70% the previous week. The odds of rates being held steady now stand at 77%.
Fed Vice Chair Philip Jefferson spurred this shift in expectations during a speech at the University of Virginia’s Darden School of Business on October 1, 2026. He emphasized that the central bank’s next policy moves must be guided by economic data, the outlook, and the balance of risks. New York Fed President John Williams aligned with that view, stating there is no urgency to raise interest rates immediately, though he still expects at least one hike before the year closes.
Goldman Sachs overhauled its projections following the September 30 release of inflation data. The financial institution pushed its forecast for the next hike to December, while also leaving open the possibility that further tightening measures may not be needed at all.
Inflation Cools, Year-End Projections Still Point Higher
Inflation numbers served as the primary catalyst behind the decline in market bets. The annual headline Personal Consumption Expenditures (PCE) price index for September came in at 3.4% - coming in below expectations of 3.7%. The annual core PCE index reached 3.0%, falling past market forecasts of 3.3%.
Despite the cooler inflation data, central bank officials are still weighing their next steps. Internal projections show that 16 of 18 Fed officials expect at least one more rate hike before the end of 2026. The median year-end rate projection stands in the 4.00%-4.25% range, above the current target set at 3.75%-4.00% following a 0.25% hike in September - the Fed’s first tightening move since July 2023.
Jefferson warned that upside inflation risks remain, driven by geopolitical developments and stronger-than-expected consumer demand. Minneapolis Fed President Neel Kashkari took a neutral stance, stating he remains open-minded and has not locked in a specific view regarding the Fed’s October decision.
Avoiding Consecutive Tightening Sentiment
A delay in central bank tightening has eased pressure on the crypto market. HashKey analyst Tim Sun noted that raising rates in October risks shifting investor perceptions, as the market could interpret September’s hike as the beginning of repeated tightening rather than a single preemptive move.
Tim Sun noted that a repeated tightening scenario would weigh on Bitcoin prices through rising Treasury yields and declining dollar liquidity.
Internal data from digital asset market participants reflected similar expectations. ViaBTC analyst Jeff Ko tracked the probability of an October rate hike dropping to 38.2% from a previous figure of 70.9%. The likelihood of the central bank raising rates in December climbed to 86%. These numbers underscore that the market is leaning toward a pause this month. Reported by crypto.news.
Read also: US Inflation Softens to 3.01%, Goldman Sachs Delays Fed Rate Hike Prediction to December
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
