Fed Rate Hike in October: Market Expectations vs Reality

New York Federal Reserve President John Williams said another Fed rate hike before the end of 2026 is 'reasonable,' but he declined to commit to a specific timing. The market, however, has already made up its mind: traders are betting on an October move with a probability of 77.5%, according to CME Group's FedWatch tool.

The latest rate hike in September was seen as a build-up of pressures rather than one sudden change in the data, Williams explained. He also emphasized that inflation is the 'big challenge' and that the Fed wants to see it return to 2% in a timely manner.

Other officials have echoed similar sentiments, with Fed Governor Michael Barr stating that further policy adjustments are likely needed to ensure inflation comes down to target in a timely fashion. However, Boston Fed President Susan Collins has warned that inflation may stay elevated well above target.