Fed Set to Hold Rates in October as Warsh Gives No Signal, Markets Shift Hike Bets to December

The Federal Reserve is expected to keep interest rates on hold when its policy committee meets on October 27–28, with markets pricing an 87% chance of no change and only a 14% chance of a 25-basis-point increase, according to Polymarket contracts updated on October 18. The odds of an October hike had climbed toward 50% after hotter-than-expected inflation data, then collapsed again as traders reassessed the likelihood of back-to-back increases.

The turning point was Chair Kevin Warsh’s silence. Speaking at the IMF and World Bank annual meetings in Bangkok on October 16 — his final public appearance before the Fed’s pre-meeting quiet period — Warsh refused to telegraph the committee’s next move, saying he does not prejudge individual meetings. Futures traders read that as a green light for patience: CME-style pricing puts the October hold at 85.1% while assigning a 74.1% chance of a hike at the year’s final meeting in December. The two-year Treasury yield, the market’s most sensitive gauge of rate expectations, has eased from 4.93% in September to 4.73%.

The debate is driven by conflicting data. September’s consumer price report showed headline inflation accelerating to 3.7% year over year, up from 3.4% in August, with core prices up 2.6% — well above the Fed’s 2% target. Yet the labor market is cooling at the same time: employers added just 29,000 jobs in September, less than half of what economists expected, and unemployment ticked up to 4.2%. San Francisco Fed President Mary Daly captured the tension on October 14, saying further hikes could be necessary but there was no urgency to act at the upcoming meeting. The Fed’s current target range is 3.75%–4.00%, set by a quarter-point increase in September — its first rate rise in more than three years.

Why this matters beyond Wall Street: the Fed’s pace sets the price of money everywhere. A slower hiking cycle has historically been kinder to stock markets — research from Charles Schwab shows equities perform much better when the Fed goes slow — and it gives borrowers, from mortgage holders to corporate debt issuers, breathing room. For emerging markets, a pause eases pressure on currencies and import costs; for forex markets, a data-dependent Fed without forward guidance means every US data release can trigger sharp moves. Warsh’s approach, in place since he took the helm in May 2026, is to guide investors incrementally rather than promise future moves — which is exactly why the December hike is priced at 74% rather than locked in.

What to watch next: the October 28 decision at 2 p.m. Eastern Time and the press conference 30 minutes later, where Warsh will have to explain how the committee weighs 3.7% inflation against a cooling jobs market. Two bigger risks lurk behind the calendar: France, where the 10-year bond yield’s spread over German bunds is approaching 150 basis points and borrowing costs are touching levels last seen in 2002, and the corporate credit market, where Oracle’s credit-default-swap spreads are widening toward high-yield territory — a potential warning about AI-era corporate debt. Track rate-sensitive moves with our free forex-tools. (Not financial advice.)