The Market Is Catching Up on the October Fed Hike
The gap is getting smaller.
When we published our October Fed forecast, prediction markets were pricing a 25 basis-point hike at 51%.
Our forecast was 61%.
Today, the market has moved to roughly 56%.
We're keeping our forecast unchanged.
Market at publication: 51%
Market now: 56%
ProbGap: 61%
The original +10 percentage-point gap is now about +5 points.
What changed?
The market has continued to digest the Fed's September meeting.
The Federal Reserve raised rates by 25 basis points to 3.75%–4.00%, its first increase in more than three years.
More importantly for October, the updated projections showed that 16 of 18 policymakers expect at least one additional rate increase before the end of 2026.
Wall Street forecasts have moved in the same direction.
Goldman Sachs now expects another 25 bp increase in October, changing its previous view that September would mark the end of the tightening cycle.
That doesn't make an October hike certain.
But it helps explain why a market that was close to a coin flip has continued moving higher.
Our forecast stays at 61%
We're not changing the forecast just because the market has moved toward it.
The distinction between another hike this year and another hike specifically in October still matters.
There is another full set of inflation and labour-market data to come before the October 27–28 meeting, and December remains an alternative if the Fed wants more time.
For now:
Market: 56%
ProbGap: 61%
Gap: +5 pp
The edge is smaller than it was at publication.
That's exactly what should happen when the market absorbs new information.
No new forecast.
No attempt to manufacture another large gap.
Just a market moving closer to our original estimate.
We'll keep tracking it.
ProbGap tracks gaps between prediction-market probabilities and independent forecasts. Forecasts are probabilistic estimates, not certainties or financial advice.