MediumIV Macro Policy & Sovereign Debt24 October 2026, Saturday
Fed expected to hold on Wednesday as markets price a December hike
The Fed enters its 27–28 October meeting with rates at 3.75–4.00%. CME FedWatch data cited by Yardeni show the market assigning a 9% probability to a hike this week and 84% to a hike at the December meeting.
According to Yardeni Research's weekly note of 24 October, futures price 2.7 hikes over the next 12 months and 1.4 over six months. Yardeni thinks the committee should raise rates on Wednesday but will not, because the midterm elections are too close. The US midterms take place on 3 November, 6 days after the decision. ING also expects a hold on 28 October, followed by a 25-basis-point hike in December to a range of 4.00–4.25%.
The vote carries the risk of 3 dissents. ING says Beth Hammack, Neel Kashkari and Lorie Logan, who voted for a hike in July, could dissent again. In the latest projections, 4 members saw 50 basis points of hikes by year-end. ING expects Chair Kevin Warsh, who is wary of forward guidance, to use plain language at his 28 October press conference; core CPI beat expectations in September with a 0.3% monthly gain.
The decision lands a day before third-quarter GDP and September PCE inflation, both due on 29 October. The Atlanta Fed's GDPNow model showed 3.5% growth for the third quarter as of 20 October. The Cleveland Fed's nowcast puts September core PCE at 3.1% year on year and headline PCE at 3.6%, up from 3.0% and 3.4% in August. Weekly jobless claims fell to 194,000. According to Yardeni, the 10-year yield ended the week at 5.0% as WTI broke above 100 dollars.
Talay assessment
Bottom line
A Fed hold on 28 October is highly likely; the real information will be how wide the statement opens the door to December and how many members dissent. With December priced at 84%, the PCE and GDP data the next day will either confirm or upset that pricing. A hold 6 days before the midterms should be read as a deferral of tightening, not an abandonment of it.
Likely effects
- US front-end yieldsUncertainWeeks
With a December hike largely priced, near-term moves depend on the tone of the statement and the number of dissents; 3 dissents would reinforce a hawkish reading.
- DollarNegativeWeeks
With the ECB and BoJ on hold, a Fed December signal keeps the rate gap in the dollar's favour and pressure on emerging market currencies persists.
- TürkiyeNegative1–6 months
A Fed hike in December would limit portfolio flows to emerging markets and keep Türkiye's external financing costs high.
Possibilities, ranked
- 1Hawkish hold60%
Rates stay unchanged, the statement stresses inflation risk and at least 1 member dissents; the December probability stays above 80%.
Watch: The 28 October vote split and September core PCE on 29 October exceeding 3.1%
- 2Neutral hold30%
Warsh avoids guidance, growth data disappoint and the December probability falls below 70%.
Watch: Third-quarter GDP on 29 October coming in well below GDPNow's 3.5%
- 3October hike10%
The committee raises rates by 25 basis points regardless of the election calendar, sharply resetting market pricing.
Watch: The decision statement at 21:00 TRT (UTC+3) on 28 October
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- December hike probability▲ 84%
- US 10-year▼ 5.0%
- WTI▲ > $100
Historical context
US 10-year yield, last 6 months
- 117/09 · Fed dot plot median for 2026 rises to 4.00-4.25% while the 10-year yield eases from 5.04% to 4.94%
- 221/09 · The Fed's Goolsbee: if inflation is coming from demand, the rate response will be sharper and front-loaded
- 323/09 · US Treasury sells $70 billion of 5-year notes at 5.033%; after hot PMIs the 10-year yield hits 5.10%, its highest since 2007
- 424/09 · India's Sensex falls 1,247.71 points to 73,580; rupee presses against the 96 threshold as Brent tops $102 and the US 10-year yield exceeds 5.11%
- 524/09 · US Treasury sells 44 billion dollars of 7-year notes at 5.085%: highest yield since April 1993 as indirect demand falls to 57.2%
- 624/09 · No joint statement at Xi–Trump summit: tariff truce extended by just 2 months from 10 November to 10 January, no new decisions on chips or rare earths
- 725/09 · Michigan consumer sentiment at a 4-month low of 48.1, 1-year inflation expectations jump to 4.6%; US 30-year yield rises to 5.50%
- 827/09 · Bessent urges Fed flexibility on rates, citing AI productivity
- 928/09 · US ten-year Treasury yield climbs to a 19-year high
- 1029/09 · US long-dated yield holds above 5.5% despite Treasury buybacks
- 1130/09 · Softer US inflation erodes the odds of an October rate rise
- 1201/10 · US Treasuries pull back from their peak as two-year yield drops 10 basis points
- 1302/10 · Logan seeks 50 more basis points while most of the Fed waits
- 1405/10 · Nasdaq hits record as Treasury yields touch 24-year high
- 1506/10 · Fed's Schmid and Daly keep the door open to hikes despite high yields
- 1607/10 · Fed minutes point to one more rate rise before year-end
- 1707/10 · US ten-year auction clears at the highest yield in a quarter-century
- 1814/10 · US inflation climbs to 3.7%, putting an October hike back in play
- 1915/10 · US producer inflation jumps to 6.3%, yet Treasury yields fall
- 2016/10 · Warsh gives no rate signal in Bangkok and October hike odds fall
- 2119/10 · Barclays now expects Fed hikes in both December and January
- 2220/10 · US pending home sales sink to their lowest since 2001
- 2320/10 · Thirty-year Treasury yield slips below the 20-year point
- 2422/10 · US 10-year yield slips below 5% as tech sell-off deepens
- 2523/10 · US firms raise selling prices at fastest pace since 2022
- 2624/10 · Fed expected to hold on Wednesday as markets price a December hike
- 2727/10 · Domestic buyers displaced foreigners at the US two-year auction