Cramer Highlights Potential for Falling Interest Rates as Fed Hike Odds Drop

CNBC's Jim Cramer expressed surprise at the potential for interest rates to decline, posting on X, 'OMG Interest rates can fall, too!!' on October 6. This comment aligns with recent data from the CME FedWatch Tool, which shows a 21.6% chance of a Federal Reserve interest rate hike at the upcoming October 28 meeting, down from previous expectations.

The shift in probabilities follows the Fed's September 16 decision to raise its benchmark target range to 3.75%-4.00%, the first increase since 2023. The move aimed to bring inflation closer to the 2% target, after August's Personal Consumption Expenditures inflation figure came in at 3.4%. Higher borrowing costs have impacted rate-sensitive sectors, with Home Depot (NYSE:HD) shares falling 6.52% between September 16 and October 1, contributing to an 18.29% loss for the year. The 10-year Treasury yield also climbed to 5.24% on October 1, up from 4.16% at the start of 2026.

Despite the likelihood of an October pause, futures traders anticipate higher probabilities for rate hikes in December and January. The CME FedWatch Tool indicates an 86.2% chance of a hike in December and a 92.2% chance in January. Across these meetings, there is a 0.0% probability of a rate cut.

The stock market has shown resilience in 2026, with the S&P 500 up 13.35%, the Nasdaq Composite rising 18.26%, and the Dow Jones gaining 5.96% year-to-date. On Monday, key ETFs tracking these indices closed higher, with SPY rising 0.67% to $774.83, QQQ up 0.88% to $756.20, and DIA increasing 0.20% to $512.11. In premarket trading on Tuesday, these ETFs continued to advance.