Fed Hike Bets Crack as September Hold Odds Storm Into Lead

Prediction markets and the CME Fedwatch tool are aligning behind the U.S. Federal Reserve holding rates steady in September, though the decision is far from settled. Traders have moved toward a pause, but pricing still leaves considerable room for another hike.

Across several closely watched gauges, the hold trade currently has the edge. Polymarket puts the probability of no change at 63%, Kalshi prices it at 65%, and CME’s Fedwatch monitor shows a tighter 55.6% chance that the Fed keeps its target range at 3.50% to 3.75%.

Polymarket’s “Fed Decision in September?” market has pulled in more than $20.3 million in total trading volume. No change trades at 63 cents, implying a 63% probability, while a quarter-point increase sits at 36%. A quarter-point cut is priced at just 1.6%. Kalshi’s September Fed decision market, with nearly $4.9 million in volume, tells a similar story: a 65% chance of holding rates, 33% for a 25-basis-point hike, and only 2% for a cut. Combined, more than $25 million has traded around September’s decision, and both markets put a hold roughly 30 percentage points ahead of a hike.

CME’s Fedwatch tool, however, keeps the hike scenario alive. It assigns a 55.6% probability to no change on Sept. 16 and a 44.4% probability to a quarter-point hike, based on prices in 30-Day Federal Funds futures. That makes CME the most hawkish of the three, with hike odds nearly 9 to 11 percentage points higher than Polymarket and Kalshi. The CME numbers have also swung hard: a week earlier, on July 31, Fedwatch showed a 67% chance of a hike and only 33% for no change, marking a serious reversal in just over a week.

The shift accelerated after the July employment report showed nonfarm payrolls falling by 23,000 while unemployment held at 4.1%. The weaker labor picture gave traders reason to question whether the Fed needs to raise borrowing costs again. The Bureau of Labor Statistics released the report Aug. 7.

The Fed kept its target range unchanged at its July 28-29 meeting. Its next meeting runs Sept. 15-16, with the policy announcement scheduled for Sept. 16. The next major test for the markets will be inflation data. If price pressures land hotter than expected, those 33% to 44.4% hike probabilities could jump fast. A softer reading would likely push even more money toward the hold side.

For now, the scoreboard favors a pause but offers nothing resembling certainty. Polymarket says 63% hold, Kalshi says 65%, and CME Fedwatch says 55.6%. The question is no longer whether traders favor a September pause—they do. The real question is whether incoming inflation and labor data can keep that trade alive before the Fed votes Sept. 16.

Source: https://news.bitcoin.com/finance/fed-hike-bets-crack-as-september-hold-odds-storm-into-lead/