Ahead of CPI, traders see three Fed hikes as unlikely this year

With the September inflation report due Wednesday, traders still see exactly three Fed rate hikes this year as very unlikely. Bets rose from around one in ten to somewhat higher on Tuesday and Wednesday morning, but the outlook remains firmly tilted away from three hikes. Across the Fed’s 2026 rate-hike outcomes, traders’ bets center on two, with one to three hikes spanning most expectations.

The move follows a steep slide earlier in October. Bets on exactly three hikes fell from around one in five on October 1 to below one in ten the next day, then stayed near that low through the weekend and early this week. They edged higher on October 5 and 6, briefly recovered after the Fed released its meeting minutes on October 7, then slipped back. The latest uptick leaves expectations little changed from when this story began.

The Fed raised rates once this year, by 25 basis points on September 16, bringing its target range to 3.75%–4.00%. Reaching exactly three hikes would require further increases; under the market’s definition, a 50-basis-point increase counts as two hikes. The September meeting minutes, released October 7, said most Fed participants thought another increase would likely be appropriate this year, though they differed on the timing and reasons.

A weak September jobs report, released October 2, added a counterpoint: it showed 29,000 jobs added and unemployment at 4.2%. Reuters reported that the report reduced expectations for an October hike and trimmed bets on a December increase, though investors still saw a December hike as likely. Cleveland Fed President Beth Hammack called on October 12 for moving toward restrictive policy “relatively quickly,” while Reuters reported that investors still expected the Fed to hold at its October meeting.

Wednesday’s inflation report will provide a fresh reading before the Fed meets October 27–28. The final scheduled meeting of the year is December 8–9. Inflation data and Fed communications could shape whether policymakers raise rates again; the September projections put the median year-end rate at 4.1%.