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Fed's October Meeting Nears: Markets Bet on a Hold as Hike Expectations Shift to December
With the Fed's Oct. 28 meeting approaching, CME data puts the odds of a hold at 85.1% after Chair Kevin Warsh gave no hike signal at the IMF meetings; the 10-year Treasury yield has retreated from its early-October peak to 5.065% but remains historically high, while AI-financing worries sent CoreWeave down 25% last week.
Why it matters
The Federal Reserve meets on Oct. 28. At its Sept. 15–16 meeting it raised rates 25 basis points to 3.75%–4.00% — its first hike since 2023. Markets now bet the Fed stands pat in October, with hike expectations pushed to December, as Wall Street reassesses financing risks around AI-related investment.
Hold expectations build
CME FedWatch data as of Oct. 19 shows traders pricing an 85.1% chance the Fed keeps rates unchanged this month, up from 42.4% a month ago. Fed Chair Kevin Warsh said at Friday's IMF event that he does not prejudge monetary policy decisions, offering no signal of an October hike. Minutes released Oct. 7 showed most officials viewed another hike by year-end as likely appropriate, but subsequent comments suggested the Fed could wait. Stephen Coltman, head of macro at 21Shares, wrote on Oct. 19 that hike expectations have shifted to December 2026.
Bonds and credit risk
The 10-year US Treasury yield stood at 5.065% in Asian trading on Oct. 19 (Wall Street Journal citing Tradeweb), down from an Oct. 5 peak of 5.311% but still historically elevated; France's borrowing premium over Germany is approaching 150 basis points, and Oracle's credit spreads are moving closer to high-yield levels. AI-financing worries are rising: CoreWeave, the debt-reliant neocloud company, saw its shares plunge 25% last week and its credit default swaps pushed to distressed levels. A busy earnings week also looms, with Tesla, Meta, Netflix, American Express and GE Aerospace reporting.
Sources
FXStreet (Oct. 19); Cryptonomist citing 21Shares (Oct. 19); GrowBeansprout citing CME FedWatch (Oct. 19).
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