Market: 43% · ProbGap: 61% · Gap: +18 pts
The market has sharply changed its mind on the October Fed meeting.
Just days ago, prediction markets were pricing a 25 bp rate hike at roughly two-thirds probability.
Today, that number is around 43%.
ProbGap's published forecast remains 61%.
That reopens an 18-point gap between our forecast and the market.
What changed?
The repricing followed a softer-than-expected U.S. inflation reading, which reduced expectations that the Federal Reserve needs to tighten again immediately.
Goldman Sachs has now pushed its forecast for the next Fed hike from October to December, adding institutional weight to the shift.
Rate markets have moved in the same direction.
But the key question for ProbGap is not whether the market had a reason to move.
It is whether it has moved too far.
The forecast gap
When PG-0006 was originally published:
Market: 51%
ProbGap: 61%
Gap: +10 pts
The market subsequently moved well above our forecast, reaching roughly the mid-60s.
It has now reversed.
Current market: ~43%
ProbGap: 61%
Current gap: +18 pts
For now, we are not revising the ProbGap forecast.
The next major test is the September U.S. employment report. A meaningful surprise there could materially change the balance of risks before the October FOMC meeting.
Until then, PG-0006 remains open.
PG-0006 · OPEN
Forecasts are probability estimates, not financial advice.