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Fed Rate-Hike Odds Drop to 20% After Weak Jobs Report

investingLive2 min read6 sources

Why did Fed rate hike odds fall to 20%?

Fed rate-hike odds for October stand near 20% on Wednesday, down from 70% a week ago, after September payrolls rose just 29,000 and Fed officials said there is no urgency.

Key numbers

Fed policy rate3.75%–4.00%+0.25 pt on Sep 16, 12-0 vote
October hike odds~20%from ~70% a week earlier
December hike odds~81%Williams says another hike may suit late 2026
September payrolls+29,000well below ~90,000 expected
August core PCE inflation3.0%vs 3.3% expected
10-year Treasury yield5.24%near 24-year high of ~5.27% (per [3])

What happened

Fed rate-hike odds for October stand near 20% on Wednesday, down from 70% a week ago, after September payrolls rose just 29,000 and Fed officials said there is no urgency. The Fed raised its main interest rate by a quarter point to 3.75%–4% on Sept. 16, and officials signaled one more hike this year. Its meeting minutes, a written record of that discussion, are due at 2 p.m. New York time today. Williams and Bowman have said there is no urgent need to act soon, while Logan says at least half a point more is needed.

Why it matters

The Federal Reserve's minutes today will show how firmly officials back another rate hike this year, which affects mortgage, loan and savings rates. Traders expect no move in October but price about an 81% chance of a hike in December. The 10-year Treasury yield, which helps set many loan rates, sits near 5.24%, close to a 24-year high. A firmer tone in the minutes could keep borrowing costs high.

Who this affects

Marketmixed
Medium impact
Bond and stock investors face a hawkish-or-dovish minutes surprise.
Companyneutral
Medium impact
The Fed's credibility on one more hike gets tested.
Competitorsneutral
Low impact
ECB, which already raised rates twice, faces similar inflation pressure.
Industrybearish
Medium impact
Borrowers and mortgage lenders face higher costs if another hike comes.

Fed vs European Central Bank

US Federal Reserve—3.75%–4.00%+0.25 pt, 2026-09-162026-10-28
European Central Bank—2.50% (deposit)+0.25 pt, 2026-09-102026-10-29

As of 2026-10-07

How we got here

  1. Fed raises rates 0.25 point to 3.75%–4.00% in a 12-0 vote, projecting one more hike.

  2. Williams says there is no need for urgency; October hike odds drop from about 70% to below 50%.

  3. September payrolls rise only 29,000; October hike odds fall to about 25%.

  4. Williams, Bowman and Logan speak; Bowman sees no urgent need for more hikes this year.

What to watch

  • Minutes wording on how many officials back another 2026 hike, due 2 p.m. New York time2026-10-07T18:00:00Z
  • Fed's next rate decision, where markets now price a hold2026-10-28
  • December meeting, where traders see about an 81% chance of a hike2026-12

Educational content only. Not investment advice.

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