Fed rate hike odds drop sharply after weak jobs report

Kalshi traders significantly increased the probability of the Federal Reserve maintaining interest rates in October after a disappointing September jobs report. The market for the Fed's October decision now stands at 77% for no change, up from 23% for a 25-basis-point hike.

The September jobs report fell short of expectations, with U.S. employers adding only 29,000 jobs, far below the projected 70,000. The unemployment rate also rose slightly from 4.1% to 4.2%. The Bureau of Labor Statistics revised downward job growth for July and August by a combined 60,000 jobs.

Federal Reserve officials have signaled patience, with New York Fed President John Williams suggesting that 'one further upward adjustment' may be needed this year but emphasizing there is 'no need for urgency.' Vice Chair Philip Jefferson echoed this sentiment, advocating for careful examination of data before any policy adjustments.

Kalshi markets now predict a 75% chance of the next rate hike occurring before 2027, a 95% chance before July 2027, and a 95% chance before 2028. The shift in expectations marks a sharp reversal from just a week ago, when the market priced a 25-basis-point October hike at 65%.