Following the release of a disappointing September employment report, which showed only 29,000 jobs added compared to expectations of over 80,000, investors have drastically lowered the likelihood of an interest rate increase by the Federal Reserve in October.
The CME's FedWatch tool indicates only a 17% chance of a rate hike, down from 36% a week prior, while Kalshi shows an 18% probability, a sharp decline from nearly 70%. This shift in sentiment is further supported by the personal consumption expenditures price index, which revealed core prices rising only 3% in August, below the anticipated 3.3%.
Adam Schickling, a senior economist at Vanguard, noted that while the labor market hasn't sharply deteriorated, it hasn't shown significant improvement either, suggesting that the Fed may choose to remain patient and await more data. Despite the reduced odds for October, traders still anticipate a rate increase in December, with FedWatch indicating over 75% odds for a hike then.
The Federal Reserve's next interest rate decision will be announced on October 28, following a two-day policy meeting