just now
The Federal Reserve announces its October decision on Wednesday at 2:00pm New York time, 10:00pm in Dubai. A hold at 3.75% to 4.00% is as close to certain as Fed meetings get: futures price it at roughly 91%, and 94 of 100 economists in the latest Reuters poll expect it. The decision itself is not the event. The event is what the Fed says about December.
Markets and economists have already penciled in another hike at the December 9 meeting. Every one of the 100 economists Reuters surveyed expects it, and futures imply roughly 84% to 90% odds of a hike by year-end. That makes Wednesday a test of whether Chair Warsh confirms the path, softens it, or leaves it deliberately open. Our view is that the case for another hike is weaker than the pricing suggests. The bond market has done much of the tightening, and the inflation that remains is driven by an energy shock that interest rates cannot fix.
The Setup
| Indicator | Latest | Context |
| Fed Funds Target | 3.75 - 4.00% | Hiked 25 bps on Sept 16; 12-0 vote |
| October Hold Odds | ~91% | Up from ~30% in late September |
| Hike by Year-End | ~84 - 90% | Expected at the Dec 9 meeting |
| Headline CPI (Sept) | 3.7% YoY | Up from 3.4%; energy-driven |
| Core CPI (Sept) | 2.6% YoY | Up from 2.4%; +0.3% MoM vs 0.2% expected |
| Core PCE (Aug) | 3.0% YoY | The Fed's preferred gauge; Sept due Oct 29 |
| Nonfarm Payrolls (Sept) | +29,000 | Vs 90,000 expected; -60,000 in revisions |
| Unemployment Rate | 4.2% | Up from 4.1% |
| 10-Year Treasury | 4.966% | Off a 24-year high of 5.35% on Oct 7 |
| Brent Crude | ~$115 | Highest since June 2022 |
Source: Federal Reserve, BLS, BEA, CME FedWatch, Reuters poll (Oct 16-20), U.S. Treasury, ICE. Data as of October 26, 2026.
How the Odds Moved
October was briefly a live meeting. In late September, futures priced roughly a two-in-three chance of a second consecutive hike. A weak September jobs report, with payrolls up just 29,000 and 60,000 jobs revised away from July and August, pulled the odds of an October move down to around 16% by October 9. The hot September CPI print on October 14, with core rising 0.3% for a second straight month, pushed them back toward 50% for a single session before the bond market rallied.
The final shift came from Warsh himself. Speaking at the IMF meetings in Bangkok on October 16, he declined to preview policy, saying "I don't prejudge meetings," while stressing that the Fed would "deliver price stability." Markets read the absence of a hawkish signal as a signal. Hold odds rose from about 72% before his remarks to above 85% afterwards, and reached 95% by October 22, a record level of certainty a week before a meeting. December was not repriced at all. It simply became the meeting where the next hike is expected.
What the Fed Told Us in September
The September minutes leave little doubt about where the Committee's center of gravity sits. All 18 participants supported the hike. Participants said they had "not seen sufficient progress on lowering inflation in recent months," saw inflation risks skewed to the upside, and in some cases described policy as "not restrictive or only mildly restrictive." A couple raised their estimates of the neutral rate. On energy, many participants warned that the longer prices stayed high, the greater the risk that cost increases would spread into broader price pressures. Most judged that another hike would likely be appropriate by year-end.
| End-2026 Dot | Participants | Implies |
| 4.375% | 4 | Two more hikes in 2026 |
| 4.125% | 12 | One more hike in 2026 |
| 3.875% | 2 | No further change |
Source: Federal Reserve Summary of Economic Projections, September 16, 2026. Median 2026 fed funds 4.1%; median 2026 core PCE projection 3.4%.
Sixteen of 18 participants projected at least one more hike this year. That is the starting point Warsh brings into Wednesday. The dot plot is not updated at this meeting, so the statement and the press conference are the only channels through which the Committee can move away from it.
The Case For and Against December
| Case for a December Hike | Case for No Further Hikes |
| Core CPI re-accelerated to 2.6% from 2.4%, with two straight 0.3% monthly prints | The inflation overshoot is concentrated in energy, and rates do not reopen the Strait of Hormuz |
| Core PCE at 3.0% remains a full point above the 2% target | Long-end yields have done the tightening: the 10-year hit a 24-year high this month |
| 16 of 18 participants already projected another hike | Payrolls rose just 29,000 in September with negative revisions; unemployment rose to 4.2% |
| The minutes flag the risk of energy costs spreading into broader prices | Wages rose 3.0% year on year, below 3.7% headline inflation: real wages are falling |
| Q3 GDP is expected at 3.2%, showing an economy that can absorb higher rates | Other central banks are tightening too, led by an expected Bank of Canada hike |
Source: BLS, BEA, Federal Reserve minutes and SEP, U.S. Treasury, consensus forecasts.
The hawkish case is coherent and it is the Committee's own. The concern is not today's energy spike but the second-round effects: energy feeding into transport, services and wage demands, and inflation expectations drifting higher. A Fed that has already hiked once to get ahead of that risk can justify a second hike as insurance.
We see less reason for it. The shock driving headline inflation is a supply shock, and the Fed's tools act on demand. Raising rates into a supply shock tightens conditions for households whose real incomes are already falling, without lowering the price of a barrel of oil. Meanwhile, the bond market has been tightening on the Fed's behalf: a 10-year Treasury above 5% for most of October raised borrowing costs across mortgages, corporate credit and the AI infrastructure buildout far more than another 25 basis points at the front end would. The labor market, close to maximum employment in September, has started to soften at the margin. The balance sheet is not easing conditions either: runoff ended in October 2025, mortgage-backed principal is reinvested into Treasury bills, maturing Treasuries are rolled over at auction, and the balance sheet has been broadly flat since reserve management purchases were paused in mid-August. There is no reason to hike. The more useful question is whether the Fed can avoid committing to one.
What to Watch on Wednesday
The statement. September's statement said the hike would "support a timelier return" to 2% inflation. Any language that implies further firming is likely confirms December. Language that ties the next move to incoming data, without a directional lean, would mark a softening.
Dissent. September was unanimous. With four participants penciling in two more hikes, the risk of a dissent runs hawkish: a vote for a hike at this meeting. A dissent in favor of a hike would harden December pricing. Unanimity on a hold, with no dissent, would be read as a Committee comfortable waiting.
Warsh on energy. Whether Warsh describes energy as a shock to look through or as a risk to inflation expectations is the clearest signal on December. The minutes leaned toward the latter.
Warsh on the labor market. A press conference that acknowledges the softer September payrolls and revisions would give the Committee room to pause. One that describes the labor market as stable would not.
The balance sheet. No change is expected. A working group on balance sheet strategy is expected to report in the first half of 2027, and until then the Fed has committed to the current approach.
Three Scenarios
Scenario 1: Hawkish Hold (Base Case)
The Fed holds, the statement keeps its reference to upside inflation risks, and Warsh leaves December clearly on the table. December pricing holds near current levels. The front end of the curve firms modestly and the dollar holds its ground. The reaction in equities is muted, because this is what the market expects, and attention moves straight to the Alphabet and Microsoft results that evening.
Scenario 2: Dovish Hold
The Fed holds and the message softens: the statement drops or tempers its directional language, or Warsh emphasizes the weakening labor market and the supply-driven nature of the energy shock. December odds fall, yields extend last week's decline, and long-duration assets benefit most: technology, gold and other rate-sensitive assets. This is the outcome most consistent with our view, though not the most likely one.
Scenario 3: Surprise Hike
With hold odds near 91%, a hike would be a genuine surprise. It would push front-end yields and the dollar higher and hit equities, particularly the leveraged AI infrastructure names that sold off this month on financing concerns. Gold would face pressure from higher real yields. We see this as a low-probability tail.
| Scenario | Likely Market Reaction | Most Exposed |
| Hawkish hold (base case) | Front end firms; dollar steady; equities muted | Little changes; focus shifts to hyperscaler earnings |
| Dovish hold | Yields fall; December odds drop; dollar softens | Beneficiaries: tech, gold, rate-sensitive sectors |
| Surprise hike | Yields and dollar jump; equities fall | Hit hardest: leveraged AI infrastructure, gold |
Source: BitDelta Pro analysis. Scenario assessments are qualitative, not statistical forecasts.
After Wednesday: The Data Fed Did Not See
The Fed decides without two numbers that arrive the next morning. The advance estimate of third quarter GDP is expected at 3.2% annualized, and September core PCE is expected to rise 0.3% month over month, up from 0.2%. A hot core PCE print would reprice December within hours, regardless of what Warsh says on Wednesday. Alphabet and Microsoft report on Wednesday evening and Amazon on Thursday, so the market will be digesting monetary policy, inflation and the AI capex cycle inside a 24-hour window.
The Bottom Line
Wednesday's hold is a formality. What matters is whether the Fed hardens December into a commitment or keeps it conditional. The Committee's own projections lean hawkish, and the market has followed them. Our view is that the data do not demand another hike: the inflation problem is an energy problem, the long end of the curve has already tightened conditions, and the labor market is softening at the edges. The best outcome is a Fed that holds, keeps its options open, and lets the bond market keep doing the work.
Research | BitDelta Pro
Dubai, UAE
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Appendix: Sources
Federal Reserve
Federal Reserve: FOMC Minutes, September 15-16, 2026
Federal Reserve: Calendar, October 2026
PBS NewsHour: Warsh Says Price Stability Is Key but Shies Away From Rate Signals
SanCap / Santander: Fed Balance Sheet Checkup (Oct 23, 2026)
Market Pricing & Surveys
CME FedWatch: Federal Funds Rate Probabilities
FatTail: Reuters Poll, Fed Seen Skipping October, Hiking in December
Hot Air: A Fed Hike Could Break the Market's Fedementalism (Oct 24, 2026)
Vantage Markets: DXY Slips as Fed Odds Fade (Oct 26, 2026)
Admiral Markets: Fed Rate Decision October 2026
Inflation, Labor & Growth
Trading Economics: US Core Inflation Above Forecasts (Oct 14, 2026)
BLS: Consumer Price Index Summary
BLS: Employment Situation Summary
FX Empire: The Week Ahead, Fed, AI Earnings and PCE
Rates & Oil
U.S. Treasury: Daily Treasury Par Yield Curve Rates
Trading Economics: Brent Crude News
