Kalshi's quarter-point hike contract fell to 6 cents from 12 cents on heavy one-way selling, and Polymarket's "no change" contract rose to 93.5 cents. The day's labor data pointed the other way.
Traders on two prediction markets cut the chance of a Federal Reserve rate increase next week roughly in half on Thursday, during a communications blackout in which no policymaker spoke.
On Kalshi, the contract that pays out if the Fed raises rates by a quarter point at its Oct. 27 to 28 meeting last traded at 6 cents at 1:45 p.m. Eastern, down from 12 cents late Wednesday and as low as 5 cents during the day. Contract prices on Kalshi can be read as rough probabilities, so the market moved from about a 12% chance of a hike to about 6%.
On Polymarket, the contract that pays if rates are unchanged after the October meeting rose to 93.5 cents from 88.5 cents early Thursday.
How the move unfolded
There was no single jump. The Kalshi contract stepped down through the session: 11 cents in the 6 a.m. hour, 10 cents through 8 a.m., 9 cents at 9 a.m., 7 cents through late morning and 6 cents after noon.
The selling was one-sided. Of roughly 184,900 contracts traded on Kalshi between 6 a.m. and 1:45 p.m., about 175,300, or 95%, were taken by traders betting against a hike. All 13 trades of 5,000 contracts or more came from that side, including the largest since 6 a.m., 40,000 contracts at 8 cents at 10:42 a.m.
What the markets were reacting to
The obvious candidates do not fit neatly. The Fed is in its customary blackout before the meeting. The day's main data release, weekly jobless claims at 194,000, was lower than forecast, a sign of a firm labor market that would ordinarily support a hike rather than undercut it.
What did coincide was a broad risk-off session: the Nasdaq fell about 2.4%, Meta Platforms dropped 7%, and the 10-year Treasury yield fell roughly 18 basis points to below 5%. Prediction markets and the bond market moved in the same direction. Oil did not. Brent rose about 3.6% to near $112.75, which on its own would raise inflation concerns.
There are other explanations as well. Large holders may have been unwinding positions ahead of settlement. Some commentators have also argued that a hike so close to the Nov. 3 midterm elections is unlikely, though that is an opinion rather than evidence.
October versus December
Prediction markets still put better-than-even odds on a hike by December, so traders have not abandoned the hawkish path. But December odds also slipped during the session, which suggests the repricing was not confined to next week's meeting.
What to watch
Any data or Fed-sourced signal before Oct. 28 that would revive an October move. The Kalshi contract closes at 1:59 p.m. Eastern on Oct. 28. A sharper rise in oil could also push hike odds back up.