About 880,000 contracts changed hands on Kalshi's hike market on Wednesday before it closed with a last trade at 3 cents, and two large sales accounted for more than 40% of the volume. The Fed held 10-2. The bet that matters now is December.
The prediction markets got the Federal Reserve's decision right on Wednesday. They also show how small the minority view looked before the vote.
Kalshi's contract on a quarter-point hike at this meeting last traded at 3 cents, at 1:58 p.m. Eastern, a minute before the market closed, down from 5 cents early Wednesday, in a range of 2 to 6 cents. On Polymarket, the contract on no change rose to 96.75 cents from 95.05 cents. At 2 p.m., the Fed held its target range at 3.75% to 4.00%. The vote was 10-2, with Lisa D. Cook and Beth M. Hammack preferring a quarter-point increase.
The final day's tape
Kalshi's hike market traded about 882,000 contracts in about 740 trades between 4:48 a.m. and its close, by our count of the exchange's public trade record. Through 1:47 p.m., 730,904 contracts had traded, about 2.5 times the volume of the previous overnight session, and takers had sold the hike on about 445,600 of them and bought it on about 285,300.
Three trades stand out. At 8:08 a.m., a buyer took about 72,000 contracts betting on a hike at 5 cents, and the price rose to 6 cents for a couple of hours. At 11:50 a.m., a single sale of about 217,500 contracts at 5 cents went the other way. At 1:34 p.m., another sale of about 162,300 contracts at 4 cents followed. The two sales together account for more than 40% of the session's volume. In the final 12 minutes, about 150,000 more contracts traded, almost all at 3 cents, including a sale of about 58,000 at 1:49 p.m.
On Polymarket, most of the final move came late: no change rose from 95.15 cents at 1 p.m. to 96.55 cents by 1:47 p.m.
None of this indicates who the traders were or why they traded. With the Fed in its blackout period, position squaring before the close and hedging are as likely explanations as any view on the decision.
Three cents and two dissents
A 3-cent price meant the market saw about a 3% chance that a majority would vote to hike. That was correct: the majority did not. But two of 12 voters did want to raise rates, a level of support for a hike that a low single-digit price does not convey. A contract on a decision measures the probability of the outcome, not how divided the committee is.
December is the live contract
With October settled, the attention moves to the Dec. 8 and 9 meeting, the last of the year and one that brings new economic projections. Before Wednesday's statement, traders put the probability of a December hike at about 80%. The statement gave both sides material: two hike dissents and an upgrade of growth to a "strong" pace, but also new language saying "the accumulation of more information" will guide the committee's next step.
Reading the result
One view is that the markets did their job. They priced the hold with high confidence and were right, and Wednesday's heavy selling of the hike contract reflected sound conviction.
The other is that the dissents are the news the prices missed. A committee in which two members wanted to move now is more likely to move in December than one that was unanimous, which may matter more for the next contract than the last one.
What to watch
December hike pricing after Chair Warsh's 2:30 p.m. press conference, any statements from the two dissenters, Thursday's GDP and PCE data, and the volume that shifts into the December contracts.