According to the CME FedWatch tool, the probability of a Federal Reserve interest rate hike on October 28 has decreased to 18.3%, down from 37.6% on September 30. Market expectations for a rate cut currently stand at 0%, making a hold the primary scenario for the upcoming meeting.
The shift in sentiment follows recent economic data, including September employment figures where employers added 29,000 jobs, significantly below the projected 90,000. Additionally, the core Personal Consumption Expenditures price index rose by 0.2% in August, which was lower than anticipated.
Despite the likelihood of a pause in October, the possibility of a rate hike in December remains, with Goldman Sachs projecting such a move. Minutes from the September FOMC meeting indicate that most participants consider further tightening appropriate for 2026, while energy costs continue to exert inflationary pressure.
The 10-year Treasury yield reached 5.342% on October 1, marking its highest level since early 2002. Analyst Benjamin Cowen suggests that bond traders are concerned about insufficient tightening, which contributes to elevated yields. Market participants are now awaiting inflation data scheduled for release on October 14.
Bitcoin reacted to the weak jobs report with a price increase, resulting in the liquidation of $27.5 million in short positions within one hour. While a rate hold could alleviate immediate pressure on Bitcoin, the long-term impact depends on whether the market interprets a delayed hike as a reprieve or a precursor to more significant tightening.
