The probability of an FOMC rate hike has dropped to 18%

The probability of a Federal Reserve (Fed) rate hike on October 28 has decreased to 18.3%, according to CME's FedWatch tool data. The probability of rate cuts currently stands at 0%, implying a rate hold. However, a decision to maintain the rate will not provide relief; the Fed raised rates in September, marking the first increase since 2023, and the probability of a December hike still persists. The decrease in rate hike probability occurred amid weak employment and inflation data. As of October 8, the chances of a rate hike stood at 37.6% on September 30. Only 29,000 jobs were added in September, while forecasts expected around 90,000. Inflation data also came in below expectations. The core Personal Consumption Expenditures (PCE) index, which the Fed considers a preferred indicator, increased by 0.2% in August. Fed Vice Chair Philip Jefferson and New York Fed President John Williams also confirmed the lack of urgent need for additional actions.

A rate cut seems unlikely for another reason: most members of the Federal Open Market Committee (FOMC) believe another rate hike in 2026 would be appropriate. Rising energy prices also add pressure. According to Yahoo, oil prices rose by about 14% by September 29, exceeding $96 per barrel. A decision to maintain current rates could remove one of the threats to Bitcoin's price, but a rate hike might be postponed until December, where, according to Goldman Sachs, it is expected to occur. According to CoinGlass, Bitcoin surged within minutes after the release of a weak employment report, then lost about $27.5 million in short positions within an hour. It's also worth mentioning that ten-year Treasury yields reached 5.342% on October 1, their highest level since early 2002.

Analyst Benjamin Cowen argues that part of traders' fears is related to the Fed potentially not reacting quickly enough, leading to rising yields. He expects fears to peak around the October 28 meeting. Holding the rate, therefore, tests whether traders will perceive the delayed hike as relief or as more serious consequences later. With 16 out of 18 Fed representatives forecasting another hike, the inflation data on October 14 may prove more important than the decision itself.