Fed Rate Hike Odds Shift Market Expectations for Late 2026

The Federal Reserve's surprise rate hike in September has dramatically shifted the market's expectations for the rest of 2026. Just twelve months ago, markets were predicting a string of cuts, but now prediction markets are leaning towards another hike before Christmas.

The September decision reset the outlook for the year, and cut-count markets that once looked lively now trade near zero. Meanwhile, hike and hold contracts are drawing significant action.

Two FOMC sessions remain this year, on October 27-28 and December 8-9. Current predictions suggest a high probability of another rate hike in October, with Kalshi pricing around 63% for a quarter-point rise and CME FedWatch estimating about 76%. Futures also point to roughly 4.2% by December.