Kalshi traders sharply increased the likelihood of the Federal Reserve holding interest rates steady in October following a weaker-than-expected September jobs report.
The market for the Fed's October decision jumped to 80% for no change following the report and currently sits at 77%, compared with 23% for a 25-basis-point increase.
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A separate Kalshi market currently prices one additional rate hike in 2026 as the most likely outcome.
Kalshi’s Next Fed rate hike market prices a 75% chance of the next rate hike occurring before 2027, an 95% chance before July 2027, and a 95% chance before 2028.
September jobs report misses expectations
U.S. employers added just 29,000 jobs in September, well below economists' expectations, while the unemployment rate edged up from 4.1% to 4.2%.
The Guardian's Gaya Gupta reported that numbers were down sharply from August's revised gain of 133,000 jobs.
“The numbers were under half of economists’ expectations of just under 70,000 new jobs,” Gupta wrote. “Most job gains were concentrated in the healthcare industry, which added 17,000 new jobs, while the information, financial and professional industries saw losses, according to the latest data from the U.S. Bureau of Labor Statistics.”
The BLS also revised July and August payroll growth down by a combined 60,000 jobs. July was revised from a gain of 21,000 jobs to a loss of 10,000, while August was revised from 162,000 to 133,000.
NPR reported that the lower job numbers mean the Fed probably won't raise rates again. The 4.2% unemployment rate was fueled by "an influx of 485,000 additional workers. The share of adults who are working or looking for work inched up by two-tenths of a percent."
“The lackluster jobs report makes it less likely the central bank will raise rates again when policymakers meet later this month,” NPR reported. “That caused a modest rally in the stock and bond markets. Investors still expect at least one additional rate hike, however, before the end of the year.”
Fed officials signal patience
Reuters reported that two of the Fed's top policymakers made the case for keeping rates steady for October.
Federal Reserve Bank of New York President John Williams said on Tuesday at the University of Buffalo that “one further upward adjustment” may be needed this year, but as of now, “there is no need for urgency.”
Federal Reserve Vice Chair Philip Jefferson echoed Williams’ message in an address at the Darden School of Business at the University of Virginia the following Thursday.
“Any future adjustments in policy should be determined by carefully examining trends in the data, the evolving outlook, and the balance of risks,” Jefferson said.
The shift marks a sharp reversal from just a week ago, when the market priced a 25-basis-point October increase at 65%. By Wednesday, no change had become the leading outcome at 66%. Following Friday's jobs report, that price climbed to 80%.
The takeaway:
Kalshi markets now predict
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