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HighIV Macro Policy & Sovereign Debt16 October 2026, Friday

Warsh gives no rate signal in Bangkok and October hike odds fall

Fed Chair Warsh said at the IMF meetings on 16 October that he was not prejudging the 27–28 October decision. In futures markets, the probability of an October hike fell from 33% to around 15%; pricing for a December hike held steady.

Location: WASHINGTON

According to Euronews, Warsh said that since September the world had broadly matched the Fed's expectations, and stressed that he does not prejudge meetings. He added that central banks, including the ECB with its 2 hikes, were tightening in tandem and that there were no free riders in the process. Warsh said AI would lift productivity over the medium term. He conceded that, for now, the investment boom was fuelling demand and pushing prices higher.

In September the Fed raised rates by 25 basis points to a range of 3.75–4.00%, its first hike since July 2023. According to Yahoo Finance, the probability of an October hike fell from 33% to around 15% after Warsh spoke. Futures continued to price roughly one quarter-point hike by the end of December. Euronews, citing CME data, put the probability of a December hike at around 90%. Sources differ on where the October probability started its fall, giving figures between 26% and 33%.

Equities closed the day lower. On 16 October the S&P 500 fell 1.09% to 7,659.44 and the Nasdaq 2.14% to 26,140.03. The Nasdaq ended the week down 4.5%, its worst showing since the end of June. The VIX volatility index jumped 21.45% to 19.99. According to Investing.com, the 10-year yield ended the week 16.5 basis points lower at 5.079%, and the 2-year yield at 4.717%. The Fed's communications blackout began on 17 October.

Talay assessment

Bottom line

Warsh's silence gave markets relief for October, but pricing for a December hike remains in place. The Fed will most probably hold on 28 October and leave the decision to the October inflation data. His emphasis on synchronised tightening carries no hint that the Fed ended its cycle in September.

Likely effects

  • US Treasury yieldsUncertainWeeks

    Pricing out an October hike pulled the 2-year yield to 4.717%; while a December hike is still expected, the decline at the front end will stay limited.

  • Equities and volatilityNegativeWeeks

    The VIX rising to 19.99 shows that rate relief has not offset selling pressure on AI stocks.

  • TürkiyePositiveWeeks

    A Fed hold in October eases the dollar and briefly improves external conditions ahead of the CBRT's 22 October decision; the risk of a December hike limits this breathing room.

Possibilities, ranked

  1. 1
    Hold in October, hike in December60%

    The Fed stays at 3.75–4.00% on 28 October and raises by 25 basis points in December.

    Watch: The 28 October FOMC statement and whether December hike odds stay around 90%

  2. 2
    Cycle ended in September25%

    Credit stress and weak employment keep the Fed on hold in December as well.

    Watch: December hike odds falling below 50%

  3. 3
    Surprise October hike15%

    Energy prices spike and the Fed delivers a second hike on 28 October.

    Watch: October hike odds climbing back above 30%

Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.

Market reaction

Indicators affected

Historical context

US 10-year yield, last 6 months

4.154.474.785.105.4110/0418/0525/0631/0708/0915/1017 September 2026 — Fed dot plot median for 2026 rises to 4.00-4.25% while the 10-year yield eases from 5.04% to 4.94%121 September 2026 — The Fed's Goolsbee: if inflation is coming from demand, the rate response will be sharper and front-loaded223 September 2026 — 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 2007324 September 2026 — 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%424 September 2026 — 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%524 September 2026 — 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 earths625 September 2026 — 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%727 September 2026 — Bessent urges Fed flexibility on rates, citing AI productivity828 September 2026 — US ten-year Treasury yield climbs to a 19-year high929 September 2026 — US long-dated yield holds above 5.5% despite Treasury buybacks1030 September 2026 — Softer US inflation erodes the odds of an October rate rise111 October 2026 — US Treasuries pull back from their peak as two-year yield drops 10 basis points122 October 2026 — Logan seeks 50 more basis points while most of the Fed waits135 October 2026 — Nasdaq hits record as Treasury yields touch 24-year high146 October 2026 — Fed's Schmid and Daly keep the door open to hikes despite high yields157 October 2026 — Fed minutes point to one more rate rise before year-end167 October 2026 — US ten-year auction clears at the highest yield in a quarter-century1714 October 2026 — US inflation climbs to 3.7%, putting an October hike back in play1815 October 2026 — US producer inflation jumps to 6.3%, yet Treasury yields fall19
  1. 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%
  2. 221/09 · The Fed's Goolsbee: if inflation is coming from demand, the rate response will be sharper and front-loaded
  3. 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
  4. 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%
  5. 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%
  6. 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
  7. 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%
  8. 827/09 · Bessent urges Fed flexibility on rates, citing AI productivity
  9. 928/09 · US ten-year Treasury yield climbs to a 19-year high
  10. 1029/09 · US long-dated yield holds above 5.5% despite Treasury buybacks
  11. 1130/09 · Softer US inflation erodes the odds of an October rate rise
  12. 1201/10 · US Treasuries pull back from their peak as two-year yield drops 10 basis points
  13. 1302/10 · Logan seeks 50 more basis points while most of the Fed waits
  14. 1405/10 · Nasdaq hits record as Treasury yields touch 24-year high
  15. 1506/10 · Fed's Schmid and Daly keep the door open to hikes despite high yields
  16. 1607/10 · Fed minutes point to one more rate rise before year-end
  17. 1707/10 · US ten-year auction clears at the highest yield in a quarter-century
  18. 1814/10 · US inflation climbs to 3.7%, putting an October hike back in play
  19. 1915/10 · US producer inflation jumps to 6.3%, yet Treasury yields fall

Sources

  1. Euronews — Fed's Warsh sees AI boosting productivity but gives no signal on next rate hike
  2. Yahoo Finance — Stock market today: Dow, S&P 500, Nasdaq sink as tech sell-off caps volatile week
  3. Investing.com — Eurozone yields languish near multi-week lows as safe-haven inflows
  4. ZeroHedge — Futures rise as Warsh stays mum