Prediction markets and CME pricing converged between 25% and 28% overnight. The steepest drop came minutes after the Fed's vice chair released his speech.
Three separate markets that price the Federal Reserve's next move now tell roughly the same story about October: a quarter-point increase at the Oct. 27-28 meeting is possible but unlikely.
On Kalshi, the contract paying out if the Fed raises rates by 25 basis points last traded at 28 cents early Friday, equivalent to a 28% implied probability. The companion contract for no change traded at 73 cents. Polymarket's October market showed about a 25% chance of a hike, with more than $22 million wagered. CME FedWatch, which derives probabilities from fed funds futures, put the odds at about 28%.
Earlier in the week, all three had priced a hike as the more likely outcome.
The sequence on Thursday
Kalshi's trade-by-trade record shows how the repricing unfolded. The hike contract slid from 33 cents to 27 cents shortly before noon Eastern on Thursday. At 1:30 p.m., the Fed released the text of Vice Chair Philip Jefferson's speech, in which he said officials "will need to come to our own judgment, which may take more time." Ten minutes later, at 1:40 p.m., the contract hit its session low of 23 cents.
The contract retested 23 cents at 3:17 p.m., traded around 25 cents at the close of regular trading, and then drifted between 26 and 28 cents overnight. A cluster of trades totaling about 5,000 contracts changed hands on the no-change side at 73 to 74 cents around 4:34 a.m.
The two Kalshi contracts summed to 101 cents at near-simultaneous prints, within the normal spread for a two-outcome market.
A December proxy
With October odds near 25%, the market's attention has shifted to the Dec. 8-9 meeting, where traders now expect the next increase. That raises the question of whether the October contract still carries information, or whether it has effectively become a bet on a surprise.
The disconnect with bonds remains unresolved. Prediction markets marked down hike odds sharply even as long-term Treasury yields reached their highest levels since 2002 on Thursday. The two moves are compatible only if investors believe the Fed will wait while the bond market does some of the tightening.
What to watch: Kalshi's hike contract in the first 15 minutes after the 8:30 a.m. jobs report. A move back above 35 cents would indicate the data reopened October. A drop below 20 cents would suggest traders see the meeting as settled.