The hold outcome traded at 61 cents. Goldman Sachs now expects the Fed to skip October, raise rates in December and possibly stop there, a view well outside market pricing.
Prediction market traders and futures traders reached roughly the same conclusion on Wednesday: an October rate increase is now less likely than not.
On Kalshi, the contract paying out if the Fed raises rates by a quarter point at its Oct. 27-28 meeting traded at 39 cents in trades between 1:44 and 1:50 p.m. Eastern. The contract for no change traded at 61 cents between 2:00 and 2:07 p.m. A move larger than a quarter point traded near 1 cent. The prices are market-implied probabilities, not forecasts.
Futures markets put the chance of an October increase at about 35% after the data, down from about 51% before the release and about 70% on Monday. Kalshi's price sits about 4 points above that, a gap that reflects different instruments trading at different times rather than a disagreement over direction.
What moved it
The shift took two sessions. On Tuesday, New York Fed President John Williams said that "there is no need for urgency" after this month's rate increase. On Wednesday, the August personal consumption expenditures report showed core inflation at 3.0% from a year earlier, against a 3.3% forecast, after the government revised July down to the same rate. Private payrolls rose a stronger-than-expected 90,000 in the same morning.
Goldman's call
Goldman Sachs went further than traders. Its economists now pencil in a December increase instead of October, and chief economist Jan Hatzius wrote of "a strong chance that the FOMC will ultimately conclude that additional rate hikes are unnecessary." An October move, in the firm's words, is now "unlikely."
Markets are not there yet. December remains priced for an increase, and futures imply a cumulative three or four over roughly 12 months, which leaves Goldman's stop-after-December path well outside market pricing. "It's still 75% odds of three hikes by the time we get to the middle of next year, so the market doesn't think this is quite behind us yet," said Rob Haworth of U.S. Bank Asset Management Group.
Adam Hetts, global head of multi-asset at Janus Henderson Investors, saw the data as unlikely to change that path. "While today's inflation data is somewhat better than expected, strong labor and GDP data suggest the print is unlikely to derail consensus expectations for another rate hike before the end of the year," he said.
The timing question
The October contract pays only on an October move. A December increase, which most forecasters still expect, resolves it as no change. The 61-cent hold price therefore captures traders pushing their timing later as much as it captures doubt about another increase at all.
What to watch
Minneapolis Fed President Neel Kashkari speaks Wednesday evening. Friday's September jobs report, with forecasters expecting 84,000 new jobs, is the last major data point before the meeting apart from September consumer prices in mid-October. A strong payroll number would test whether the October contract can climb back toward 50 cents. A weak one would move attention to the December contract.