Financial markets rarely agree on a number, but in the days after the Federal Reserve’s October 28 decision they came close: a December rate hike was priced at roughly 85 percent immediately after the hold, according to CME FedWatch data reported after the meeting, up from about 78 percent the day before. By late Thursday the pricing had slipped to about 79.6 percent, according to IBTimes figures, while prediction markets put a December rise at 75.5 percent, down from 80.5 percent on Wednesday afternoon. The range, roughly three in four to better than four in five, is the market’s way of saying a hike is likely but not certain, and the movement inside that range is the story of the week.
The decision itself was a hold at 3.75 to 4.00 percent, in a 10-2 vote, with Governor Lisa Cook and Cleveland Fed President Beth Hammack dissenting in favour of a 25 basis point increase immediately. The Fed had raised rates by 25 basis points on September 16, its first hike since July 2023, as inflation picked up again, and the October statement upgraded its description of growth to strong while saying inflation remains elevated. Chair Kevin Warsh gave no guidance on December, said politics played no role, and outlined a calendar change: fewer rate setting meetings from 2027, with one strategy meeting that year and two in 2028. Markets read the meeting change as dovish, even as the dissents read as hawkish, and the two signals pulled pricing in opposite directions.
The data behind the odds
The inflation data support the hawkish reading. Consumer prices rose 3.7 percent in the year through September, and the PCE price index, the Fed’s preferred gauge, rose 3.6 percent headline and 3.1 percent core in September, matching expectations. The September dot plot, in which 16 of 18 participants pencilled in at least one more rise this year, points the same way. Analysts noted that officials who voted with the majority may have done so because they expect a December hike, not because they oppose one, and one strategist put it bluntly: the bar is very high for the Fed not to hike again. In that reading, the dissents are not a split in the committee but a preview of its December decision.
The dovish reading rests on tightening already under way. The 10 year Treasury yield has hovered near 5 percent, which raises mortgage and corporate borrowing costs without any Fed move, and Warsh’s description of the stretch to December as an information rich interval is a reminder that data, not dissents, will decide. The Fed held rates in a split vote and outlined fewer rate setting meetings, and the next major data point is October CPI, due November 10, which will either lock in the hike or give the patient camp its argument. No Fed officials have spoken publicly since Warsh’s press conference, so the first post meeting speeches will also be parsed for any shift.
What the odds mean for borrowers
For households and businesses, the odds translate into costs. A December hike priced near 80 percent, combined with a 10 year yield near 5 percent, keeps borrowing costs elevated into year end, and a hike in December would push them higher still. For investors, the message is narrower: the Fed is paused, not finished, and it has deliberately left itself room to move without having promised to do so. That ambiguity is why the odds moved twice in two days, from 85 percent to below 80 percent, and why a single inflation print can move them again.
The December meeting runs on December 8 and 9, with the decision due on December 9 alongside new projections. Between now and then, every data release and every Fed speech will be read as a clue, and the odds will be updated in real time. The honest summary of the week is therefore not a forecast but a price: markets think a December hike is likely, roughly four chances in five immediately after the decision and roughly three in four a day later, and they are waiting for inflation data to settle the argument the committee left open.
