Fed Hike Odds Collapse to 16% on Prediction Markets After Soft Jobs Report

The odds of another Federal Reserve interest-rate hike in October plunged to 16% Friday after U.S. job growth came in far below expectations.

Traders on Polymarket had put the probability of a 25-basis-point increase at about 69% on Monday, before softer inflation data, cautious Fed commentary and Friday’s weak jobs report drove the odds down.

Weak Jobs Report Hits Rate Hike Bets

Friday’s September jobs report showed the U.S. economy added just 29,000 jobs, far below the 90,000 economists expected.

The weakness went beyond the headline. Unemployment rose to 4.2% from 4.1%, while wage growth slowed to just 0.1% month over month and 3.0% from a year earlier.

Earlier months also looked worse after revisions. The Bureau of Labor Statistics cut August payroll growth to 133,000 from 162,000 and revised July from a gain of 21,000 to a loss of 10,000, wiping 60,000 jobs from previous estimates.

Rate-Hike Odds Were Already Falling

Friday’s jobs report added to a case against an October hike that had already been building all week.

New York Fed President John Williams said there was “no need for urgency,” while Fed Vice Chair Philip Jefferson said policymakers may need more time before making their next move.

Softer inflation data pointed the same way. Truflation Head of Data Oliver Rust told Benzinga Wednesday that another increase was becoming harder to justify after core PCE undershot expectations.

“We don’t understand how you can justify an increase of another Fed hike,” Rust said.

Traders Still See December Hike

The Fed under Chair Kevin Warsh raised rates by 25 basis points to 3.75%-4.00% on Sept. 16, its first increase since 2023.

A separate Polymarket contract puts the probability of a 25-basis-point December hike at about 68%, suggesting traders have shifted toward delaying the next increase rather than abandoning further tightening.

Stocks rallied as rate-hike expectations fell, with the SPDR S&P 500 ETF Trust (NYSE:SPY) up about 1% and the Invesco QQQ Trust (NASDAQ:QQQ) gaining 1.5% Friday morning.

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