Markets Bet the Fed Skips October After Hawkish Minutes

Most Federal Reserve officials still expect another rate increase by year-end, according to minutes of the September 15-16 meeting released on October 7. Traders have turned that bias into a calendar bet the text never made: skip the October 27-28 meeting, then hike on December 8-9.

The September 16 decision was unanimous, a quarter-point rise in the federal funds target to 3.75% to 4.00%, the first hike since July 2023. The minutes keep a second move in play. They do not name the meeting that would deliver it.

A Unanimous Hike to 3.75% to 4%

The Federal Open Market Committee voted 12-0 on September 16 to raise the target range by a quarter point, from 3.50% to 3.75%. It was the first policy move under Chair Kevin Warsh and followed five straight holds after a rate cut in December 2025. The statement ran barely more than a hundred words and dropped the older line that elevated inflation partly reflected supply shocks.

“Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal. The Committee will deliver price stability,” the September 16 statement said. Voting for the action were Warsh, John C. Williams, Michael S. Barr, Michelle W. Bowman, Lisa D. Cook, Beth M. Hammack, Philip N. Jefferson, Neel Kashkari, Lorie K. Logan, Anna Paulson, Jerome H. Powell, and Christopher J. Waller. No one voted no.

Warsh told the post-meeting press conference that the rise had “removed a dose of accommodation.” The full introductory statement is on the Fed’s own channel.

Eighteen officials submitted forecasts with that meeting. The median year-end funds rate of 4.1% is one quarter-point above the new 3.875% midpoint of the target range, and it is up from 3.8% in the June round. Growth for 2026 was marked up to 2.3% from 2.2%. The jobless rate was marked down to 4.1% from 4.3%. Headline PCE inflation was marked up to 3.7% from 3.6%, and core PCE to 3.4% from 3.3%. The longer-run funds-rate median rose to 3.2% from 3.1%.

The 2026 dots cluster in three places. Twelve officials sat at 4.125%, the midpoint of a 4.00% to 4.25% range, which is one more hike. Four sat at 4.375%, two more hikes. Two sat at 3.875%, a stop at the September setting. Sixteen of the eighteen therefore see at least one additional increase before year-end. The 2027 median is still 4.1%.

Most Officials Want Another Increase by Year-End

Three weeks later, the minutes did not add a new instruction. They spelled out the same path in committee language, then left every future meeting open.

With regard to the outlook for monetary policy beyond the current meeting, most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end.

Participants emphasized, however, that they approached each meeting with an open mind and decisions at future meetings would depend on incoming information and its implications for the outlook and the balance of risks.

Minutes of the Federal Open Market Committee, September 15-16, 2026

That pairing is the whole argument. The staff record also says several officials viewed the current policy rate as not restrictive, or only mildly so, which is why a second move still looks cheap to them as insurance. Almost all saw inflation risks tilted up and labor-market risks as more balanced. The minutes say officials had not seen enough progress on prices in recent months.

The phrase that markets are trading, another increase would likely be appropriate by year-end, does not say October and does not say December. New York Fed President John C. Williams later put a season on it, saying one further upward adjustment of the target range may be appropriate late this year if the outlook holds. Late this year, in a calendar with two meetings left, is the opening Goldman and the prediction markets walked through.

What Are the Odds of an October Fed Hike?

Polymarket on October 8 gave no change an 83.5% chance at the October 27-28 meeting and a 15.5% chance of a 25 basis point increase, on the October FOMC decision contract that had taken $28.52 million in volume. The same day’s December contract put a 25 basis point hike at 74.5% and a hold at 23.5%. A separate contract priced another hike sometime in 2026 at 77.5%.

Those are meeting-by-meeting bets. Fed funds futures probabilities on CME FedWatch, as of October 7, told a related but different story about the level of the target by each date. An October move into 4.00% to 4.25% sat at 17.2%. By the December meeting the 4.00% to 4.25% range was 70.5%, and 4.25% to 4.50% was 13.9%, which is the cumulative path, not a second independent vote on a 25 basis point step.

POLYMARKET PRICES FOR THE NEXT THREE MEETINGS

The implied path is hike, pause, hike. That is a trader construction. The minutes still say each sitting is live, which is why an October surprise is not a zero, even if 15.5% is a long shot against 83.5%.

After Cooler Inflation, Goldman Pushed the Hike to December

Wall Street wrote the same calendar before the minutes landed. David Mericle, Goldman Sachs’s chief U.S. economist, had first moved the firm to a second 25 basis point hike in October after the September dots and Warsh’s press conference, calling the package more hawkish than expected. That call lasted two weeks.

Jan Hatzius, the firm’s chief economist, then moved its second hike to December after the August inflation print and Williams’s “late this year” remarks. Goldman now sees little chance of a back-to-back move on October 27-28. Hatzius also left the door open to stopping altogether.

We are pushing back the second hike in our forecast to December, and we see a strong chance that the FOMC will ultimately conclude that additional rate hikes are unnecessary.

Jan Hatzius, chief economist, Goldman Sachs

The firm’s 2026 core PCE forecast is 3.0% on a fourth-quarter-to-fourth-quarter basis, four tenths under the FOMC’s 3.4% median. That gap is the other side of the wager. Markets are paying 74.5% for a December hike. Goldman’s base case is the same meeting, with a strong chance the extra increase is never needed. The minutes do not settle which of those December stories is right. They only keep both alive.

What officials had in the room in mid-September was firmer than the print that later moved Hatzius. Staff estimated August total PCE inflation at 3.8% and core at 3.4%. The Bureau of Economic Analysis later put August PCE inflation at 3.4%, below that staff estimate, after a methodology change the staff had already flagged. Softer incoming prices are why October odds fell from a coin flip in mid-September into the mid-80s for a hold, and they are why the minutes, which freeze the September discussion, did not yank those odds back up.

Energy, Tariffs, and AI Demand Are the Named Risks

The hawkish residue in the minutes is the inflation file, not a date. Staff told the committee that August prices were still running hot, led by energy after two months of declines, with core stuck at 3.4%. It blamed past tariff increases, higher energy and input costs from geopolitical shocks, and an increase in technology-related consumer goods prices tied to the AI buildout. Under the BEA’s then-pending new method, staff put August total inflation at 3.6% and core at 3.2%, still far above 2%.

The labor market, in the same briefing, was not the reason to wait. The jobless rate was 4.1% in July and August, three tenths below its average in the second half of 2025. Payroll gains picked up in August. Average hourly earnings were up 3.1% over the 12 months through August, and the employment cost index for private workers was up 3.3% through June, both slower than a year earlier. Financing was still easy for large firms and tight for mortgages. Equity gains this year, the manager said, came from earnings, not from higher multiples, and AI-infrastructure names led.

WHAT OFFICIALS BLAMED FOR STICKY PRICES

• Energy and geopolitics: Crude and refined-fuel prices rose with Middle East disruptions, and the European Central Bank hiked on the same energy shock.
• The AI buildout: Staff and several officials tied higher core-goods prices and heavy private debt issuance to AI infrastructure, and a couple of officials wanted those price increases kept from spreading.
• Tariffs: Past duty increases were still in the price data, even as some officials said those effects were starting to fade while AI effects were still rising.
• A low bar on restriction: Several officials called the new 3.75% to 4.00% range not restrictive, or only mildly so, which makes a second hike look like cheap insurance rather than a squeeze.

Nominal Treasury yields rose about 35 basis points across the 2- to 10-year sector in the intermeeting period, the manager told the committee, on a higher expected policy path, strong data, geopolitics, and competition for capital from AI-related borrowing. Longer-term inflation expectations stayed in line with 2%. Short-term inflation compensation moved with oil. That mix, strong demand plus energy plus AI capex, is what desks treated as the hawkish add-on once the year-end hike sentence was already known from the dots.

The $83,000 Bitcoin Print Was Set Before 2 p.m.

Bitcoin did not dump on the minutes. It was already sliding on oil and yields, then ticked up after the 2 p.m. Eastern release.

BITCOIN AROUND THE MINUTES

• Coinbase snapshot: BTC-USD last traded at $83,131.23 at 23:10 UTC on October 7, about 2.82% below a rolling open of $85,539.77 on that venue.
• The hour before 2 p.m. ET: The 17:00-18:00 UTC candle closed at $83,098.01, just ahead of the scheduled release.
• The hour after: The next close was $83,372.79, a 0.33% bounce, and the 20:00-21:00 UTC close was $83,382.81.
• The 24-hour window: The decline was the oil-and-yields session, not a straight-line reaction to the document.

A $39 billion 10-year Treasury auction on October 7 stopped at the highest yield for that sale since November 2000, even as demand was described as solid. That is the tape bitcoin was trading when the minutes hit. A hold priced at 83.5% for October, with a December hike already in the 70s, does not give crypto a new shock. It confirms a path that had been built after the dots, the cooler August PCE print, and Williams’s “late this year” line. The minutes froze September’s hawkish discussion. They did not reprice October.

October 27 and December 8 Are the Dates That Matter

The Fed’s published calendar leaves two regular meetings in 2026 after September. Only one of them comes with a new Summary of Economic Projections.

THE SECOND-HIKE CALENDAR

1. September 16, 2026: The FOMC raises the funds rate 25 basis points to 3.75% to 4.00% in a 12-0 vote and publishes a 4.1% year-end median.
2. September 30, 2026: Softer August inflation and Williams’s late-year remark lead Goldman to take October off its base case.
3. October 7, 2026: Minutes show most officials still want another increase by year-end and still treat each meeting as live.
4. October 27-28, 2026: Next decision, no new dots. Polymarket’s hold is 83.5%.
5. December 8-9, 2026: Last scheduled 2026 meeting, and it includes a new SEP. Polymarket’s 25 basis point hike is 74.5%.

The remaining 2026 decisions are October 27-28 and December 8-9. Only the second of those meetings comes with a new set of rate dots, which is why the market has filled in a date the minutes refused to write.

Disclaimer: This article is news reporting and analysis of Federal Reserve documents, futures pricing, and prediction-market contracts, and it is informational only. It is not investment, trading, or cryptocurrency advice, and it is not a recommendation to buy, sell, or hold bitcoin, Treasuries, fed-funds contracts, or Polymarket positions. Readers should consult a licensed financial adviser or investment professional before acting on rate-path or crypto views. Figures and odds reflect the cited Fed releases, CME FedWatch, Polymarket, and Coinbase snapshots as of the dates named in the piece and will change with new data and new FOMC decisions.