October Fed hike odds have climbed from 51% to around 68%, moving past our published 61% forecast.
When we published PG-0006 on September 18, the prediction market gave the Federal Reserve a 51% probability of raising rates by 25 basis points at its October meeting.
Our forecast was higher:
Market: 51%
ProbGap: 61%
Gap: +10 percentage points
One week later, that gap has disappeared.
Early on September 25, Kalshi was pricing a 25 bp October hike at around 68%. Fed funds futures were similarly hawkish, implying roughly a 70% probability of another increase next month.
The comparison now looks very different:
Market: ~68%
ProbGap: 61%
Current gap: −7 percentage points
In other words, the market did not merely converge toward our original forecast.
It moved through it.
What changed?
The latest repricing comes alongside another sharp move in global bond markets.
The U.S. 10-year Treasury yield climbed as high as 5.225% overnight, its highest level in 19 years. The 30-year yield also pushed above 5.5%.
Markets are increasingly pricing a continuation of the Fed's tightening cycle following September's 25 bp increase.
Oil remains elevated, inflation concerns remain persistent, and the rates market has become significantly more hawkish than it was when PG-0006 was published.
Are we changing the forecast?
Not yet.
Our published ProbGap forecast remains 61%.
That is deliberate.
A prediction market moving higher is not, by itself, a reason for our independent forecast to follow it. Doing so would defeat the purpose of maintaining a separate estimate.
The overnight bond move is important information, but it is primarily a market repricing event rather than a decisive new inflation release or Fed decision.
For now, the more interesting development is therefore the reversal in the gap itself:
September 18: ProbGap +10 pp above market
September 25: ProbGap ~7 pp below market
That is exactly the kind of movement a transparent forecasting track record should capture.
What we’re watching next
The October FOMC meeting takes place on October 27–28.
Between now and then, incoming inflation, employment and Fed communication will determine whether the market's new ~68–70% pricing is justified — and whether our 61% forecast needs to move.
For now, PG-0006 remains open.
Forecast: 61%
Market: ~68%
Gap: −7 pp
ProbGap tracks where independent forecasts differ from prediction-market prices — and follows those differences through resolution.
Sources: Kalshi; Reuters. Market probabilities change continuously.