Markets Trim Fed Hike Odds as September Pause Gains Ground

Prediction markets and futures show growing odds that the Federal Reserve will hold its policy rate on Sept. 16. Polymarket prices a September hold at about 63% after more than $20.3 million traded, with a 25-basis-point increase at about 36% and a 25-basis-point cut near 1.6%. Kalshi’s market gives a 65% probability of no change, 33% for a hike and 2% for a cut, on roughly $4.9 million in volume. Combined trading on the two platforms exceeds $25 million.

The CME Fedwatch tool, which derives probabilities from 30-Day Federal Funds futures, shows a 55.6% chance the Fed will keep its target range at 3.50%–3.75% and a 44.4% chance of a 25-basis-point hike. A week earlier, on July 31, Fedwatch priced a 67% probability of a quarter-point increase and a 33% probability of no change.

Markets shifted after the Bureau of Labor Statistics released the July employment report on Aug. 7. Nonfarm payrolls fell by 23,000 and the unemployment rate remained at 4.1%. That weaker jobs print reduced market expectations for another rapid rate rise and pushed prediction markets more decisively toward a pause while futures moved closer to even odds.

The Federal Open Market Committee left its target range at 3.50%–3.75% at the July 28–29 meeting. The next FOMC meeting runs Sept. 15–16, with the policy announcement scheduled for Sept. 16. Market pricing currently frames the September decision as a choice between standing pat and a quarter-point hike; wagers on a cut are minimal across platforms.

Inflation reports will be the next major influence on market probabilities. A hotter-than-expected Consumer Price Index or other inflation data could raise the odds of a hike, while softer inflation readings would likely bolster the pause trade. The prediction markets trade contracts directly, while CME Fedwatch converts futures prices into probabilities, explaining why the exact odds differ across the three indicators.