Next Fed rate hike?
Short Answer
The model assigns meaningfully lower odds than the market for a Fed rate hike before 2028 (65.5% model vs 78.0% market), driven by reduced expectations for further tightening following the weak July 2026 jobs report.
1. Executive Verdict
- Since last update (~24d): The model's probability for a hike before 2027 declined 24.1pp (model_led), flipping the edge to -22.1pp.
- Outcomes before July 2027 and 2028 also saw model-led decreases and edge flips.
- The "Before July 2026" outcome resolved to 0.0%, with no market change.
- A rate hike before 2028 appears likely, despite recent weaker July 2026 jobs data.
- The July 2026 jobs report reduced market expectations for a rate hike before 2027.
- Sustained monthly inflation above 0.2% would likely compel a Federal Reserve hike.
Who Wins and Why
| Outcome | Market | Model | Why |
|---|---|---|---|
| Before 2027 | 56.0% | 33.9% | The weak July 2026 jobs report significantly reduced the likelihood of a hike before 2027. |
| Before July 2027 | 72.0% | 54.2% | The July 2026 jobs report tempered tightening expectations, though conditions may evolve. |
| Before 2028 | 78.0% | 65.5% | The jobs report's impact on a hike before 2028 appears less significant long-term. |
Current Context
Market expectations for a September hike significantly declined after recent data. The Federal Reserve's target range for the federal funds rate is 3-1/2 to 3-3/4 percent, set by the FOMC on July 29, 2026, when rates were held steady [^][^]. Following a weak July jobs report, released August 7, 2026, prediction markets showed the probability of a September hike falling to approximately 38%–44% [^][^]. FXEmpire reported a 25 basis point hike in September dropped from 56.00% to 44.00% [^][^][^][^][^][^]. Seeking Alpha commentary also indicated market expectations moved down to 43.00% [^][^][^][^][^][^]. As of early August 2026, CME FedWatch anticipates only one rate hike for the remainder of the year [^]. The next scheduled FOMC meetings are September 15–16, October 27–28, and December 8–9 [^][^].
Economists are divided; Fed officials emphasize data dependence on policy. Some economists still expect a rate hike in 2026 due to persistent inflation, while others suggest the Fed may hold steady or pivot toward employment, depending on upcoming CPI and labor market indicators [^][^]. New York Fed President John Williams stated in August 2026 that current monetary policy supports disinflation, but the FOMC remains ready to act if the economy deviates from its 2% inflation goal [^]. Recent market commentary highlights a focus on policy uncertainty, inflation risks, and the Fed’s reaction function, rather than an immediate tightening cycle [^][^][^][^][^][^]. On August 7, 2026, Mohamed El-Erian noted market comfort with Fed independence, attributing long-end yield drivers to demand for loanable funds, deficits, and large capital expenditure needs [^][^][^][^][^][^].
2. Market Behavior & Price Dynamics
Historical Price (Probability)
Outcome probability
Date
This market shows a clear downward trend in the perceived probability of a near-term Fed rate hike. The contract opened at 70.0% and has since traded in a range between 50.0% and 78.0%, currently priced at 56.0%. Two significant, data-driven drops define the recent price action. On July 29, 2026, the probability fell 11 percentage points after the FOMC announced its decision to hold the federal funds rate steady at 3.50% to 3.75%. A second 11-point drop occurred on August 7, 2026, immediately following the release of a weaker-than-expected July jobs report, which dampened expectations for a September rate increase.
The total traded volume of 581,201 contracts indicates substantial market interest. The price chart suggests a resistance level near the high of 78.0% and a potential support level at the low of 50.0%. The sharp price reactions to both the FOMC decision and the jobs data show that market sentiment is highly sensitive to new economic information. Overall, the price action reflects eroding confidence in a forthcoming rate hike, with participants actively repricing risk downwards in response to specific economic developments. The current 56.0% price still implies a hike is more likely than not, but conviction has fallen significantly from earlier highs.
3. Significant Price Movements
Notable price changes detected in the chart, along with research into what caused each movement.
Outcome: Before 2027
📉 August 07, 2026: 11.0pp drop
Price decreased from 65.0% to 54.0%
What happened: The primary driver of the 11.0 percentage point drop in the "Next Fed rate hike? Before 2027" market on August 07, 2026, was the release of a weaker-than-expected July jobs report on that same day [^][^][^]. This economic data immediately caused market expectations for a September Federal Reserve rate hike to significantly tumble, with futures markets pricing in a higher probability of rates holding steady [^][^]. Traditional news outlets widely reported on this shift in expectations coinciding with the jobs report release [^][^][^]. Based on the provided information, social media activity was irrelevant.
Outcome: Before 2028
📈 July 30, 2026: 10.0pp spike
Price increased from 70.0% to 80.0%
What happened: The primary driver of the 10.0 percentage point spike in the "Next Fed rate hike?" market on July 30, 2026, was likely the preceding day's Federal Open Market Committee (FOMC) statement [^][^][^]. Although the Federal Reserve voted to maintain the federal funds rate at 3.5%–3.75%, three regional presidents publicly dissented, advocating for a 25-basis-point rate hike [^][^][^]. This revealed a stronger hawkish sentiment within the committee than perhaps previously anticipated, leading market participants to increase the perceived probability of a rate hike occurring "Before 2028." Social media activity was not identified as a driver based on the available information.
📉 July 29, 2026: 37.0pp drop
Price decreased from 86.0% to 49.0%
What happened: The primary driver of the 37.0 percentage point drop on July 29, 2026, was the Federal Open Market Committee (FOMC) announcing its decision to maintain the federal funds rate in a target range of 3.50% to 3.75% [^][^][^]. This decision to hold rates steady, despite some market expectations of a potential hike at that meeting [^][^][^][^], directly reduced the perceived probability of a rate hike occurring "Before 2028." The FOMC's action caused a significant repricing as it signaled a delay or lesser likelihood of future rate increases compared to previous expectations. Based on the provided information, no social media activity was identified as a primary driver, contributing accelerant, or relevant factor for this price movement.
4. Market Data
Contract Snapshot
This market concerns the timing of the next Federal Reserve interest rate hike, with contracts resolving "Yes" if a hike occurs before a specified deadline (e.g., "Before 2027," "Before July 2027," "Before 2028") and "No" if it does not. The precise definition of what constitutes a "Fed rate hike" for resolution purposes is not detailed in the provided content. One contract has a "Max payout" date of December 31, 2027, but no other special settlement conditions are mentioned.
Available Contracts
Market options and current pricing
| Outcome bucket | Yes (price) | No (price) | Last trade probability |
|---|---|---|---|
| Before 2027 | $0.57 | $0.44 | 56% |
| Before July 2027 | $0.72 | $0.29 | 72% |
| Before 2028 | $0.79 | $0.22 | 78% |
Market Discussion
Prediction markets are closely divided on the Federal Reserve's policy for the September 15-16, 2026, FOMC meeting, with probabilities for a hold ranging from approximately 51-61% and a 25-basis-point hike from 37-48% [^][^][^][^]. Recent weak July jobs data appears to have reduced September rate-hike expectations, moving market-implied odds for a hike below 50% [^][^][^]. While near-term uncertainty persists, overall market sentiment for at least one rate hike by the end of 2026 remains positive [^][^][^][^], with participants closely watching the July CPI report scheduled for August 13, 2026, and upcoming Fed communications for future direction [^][^][^][^].
5. What specific inflation and employment data points in Q3-Q4 2026 would likely compel the FOMC to implement a rate hike before year-end?
| Federal Funds Rate Target Range | 3.50%–3.75% (as of August 8, 2026) [^][^] |
|---|---|
| Q3 2026 Core PCE Nowcast | 3.01 (nonannualized month-over-month rates/seasonally adjusted quarterly rates) [^] |
| Market Rate Hike Expectation | One rate hike for the remainder of 2026 (as of August 5, 2026) [^] |
Sustained inflation above 0.2% monthly would likely trigger a hike. To compel a rate hike before year-end 2026, the Federal Open Market Committee (FOMC) would likely require monthly core Personal Consumption Expenditures (PCE) prints consistently above 0.2% month-over-month, alongside robust labor market conditions [^][^][^]. As of August 8, 2026, the FOMC maintains the federal funds rate target range at 3.50%–3.75% [^]. This decision followed a 9–3 vote in July 2026, where three members dissented in favor of a 25-basis-point rate increase [^][^]. The committee is closely monitoring persistent, elevated inflation, particularly core PCE and services inflation, in addition to energy price shocks driven by geopolitical tensions [^][^]. Current Cleveland Fed inflation nowcasting projects Q3 2026 core PCE at 3.01 (expressed as nonannualized month-over-month rates/seasonally adjusted quarterly rates), a level that, if realized consistently, could support an accelerated hike path [^].
A strong labor market is critical for the FOMC's hawkish stance. The labor market acts as a crucial constraint for the FOMC, with essential data points including job gains, wage growth, and the unemployment rate [^][^]. Conversely, weak employment data could potentially temper the committee's hawkish bias, even if inflation remains sticky [^][^]. As of August 5, 2026, CME Group's 'Rates Recap' indicates that the market is currently pricing in only one rate hike for the remainder of 2026 [^]. This establishes a baseline that would need to be overturned by stronger Q3–Q4 economic data to imply a rate hike before year-end [^].
6. What evidence from the July and August 2026 jobs reports supports the market's recent decline in expectations for a rate hike at the September FOMC meeting?
| July 2026 Jobs Change | -23,000 jobs [^][^][^] |
|---|---|
| July 2026 Unemployment Rate | 4.1 percent [^][^][^] |
| Sep FOMC Rate Hold Probability (Aug 7) | 61-64% [^] |
The July 2026 jobs report revealed a significantly weaker labor market. This report, released on August 7, 2026, was the primary factor driving the market's recent decline in expectations for a September FOMC rate hike [^][^][^]. It indicated that the U.S. economy unexpectedly shed 23,000 jobs, falling short of economist expectations for an increase in payrolls [^][^][^]. Further softening labor market conditions were evident as the unemployment rate remained stable at 4.1 percent, with little change in nonfarm payroll employment [^][^][^]. Wage growth for July was recorded at 0.1% month-over-month and 3.2% year-over-year, which was lower than anticipated and below the prevailing inflation rate of 3.5% [^][^].
Market expectations for a September rate hike declined significantly after this data. Following the July jobs data release, the probability of the Federal Reserve holding interest rates steady rose to approximately 55-56% from 45%, while the probability of a 25-basis-point hike decreased to roughly 44% from 55% [^][^][^]. As of August 7, 2026, prediction markets indicated a 61-64% probability that the Federal Reserve would maintain current interest rates at the September 15-16 meeting, with a 35-37% probability of a 25-basis-point hike [^]. Market participants are now pricing in limited expectations for further rate hikes through the remainder of 2026, aligning with the cooling economic data [^][^].
7. How do recent public statements from hawkish vs. dovish FOMC members compare regarding the necessity of another rate hike in 2026?
| FOMC Vote | 9-3 to maintain rates at July 29, 2026 meeting [^][^][^] |
|---|---|
| Dissenting Votes | 3 regional presidents preferred a 25-basis-point hike [^][^][^] |
| Current Federal Funds Rate | 3.50%–3.75% [^][^][^] |
Several FOMC members advocate for an additional rate hike in 2026. Hawkish members include three regional presidents—Beth Hammack, Neel Kashkari, and Lorie Logan—who dissented at the July 29, 2026, FOMC meeting, preferring a 25-basis-point increase to the federal funds rate [^][^][^]. Governor Christopher Waller has stated that if upcoming core inflation readings remain elevated, the Federal Open Market Committee would need to consider further monetary policy tightening [^][^]. Furthermore, Fed Chair Kevin Warsh has underscored a firm commitment to the 2% inflation target, with some analysts interpreting his remarks as indicating a readiness to implement a rate hike if inflation data continues to be high [^][^][^].
However, the majority of the FOMC voted to maintain current interest rates. The committee voted 9-3 to keep the federal funds rate steady at 3.50%–3.75% at the July 29, 2026, meeting [^][^][^]. Despite his conditional hawkish stance, Governor Waller also voted with the majority to hold rates at this meeting [^][^]. New York Fed President John Williams commented in early August 2026 that current policy settings are well-positioned to support a disinflationary path, while also noting that action would be taken if the economy deviated from its trajectory to achieve the 2% inflation target [^]. Notably, some analysts also viewed Fed Chair Kevin Warsh's press conference as dovish, attributing this to his emphasis on market-driven tightening [^].
8. How have implied probabilities from the CME FedWatch Tool for the remaining 2026 FOMC meetings shifted since the July 29th policy decision?
| Sept 2026 hike prob (post-July 29) | Approximately 57% [^] |
|---|---|
| Sept 2026 hike prob (Aug 7-8) | Roughly 49-50% [^][^] |
| Remaining 2026 hikes priced (Aug) | One rate hike [^] |
Market expectations for a September rate hike significantly shifted after July. Following the July 29, 2026, FOMC meeting, the market-implied probability for a September 2026 rate hike, as measured by the CME FedWatch tool, was approximately 57% [^]. However, by August 7-8, 2026, market expectations for the September 16, 2026, FOMC meeting had shifted to a more balanced outlook. At that time, some sources indicated a 49-50% chance of a 25 basis point hike and a 50-51% chance of maintaining current rates [^][^]. This change in sentiment occurred after the July meeting concluded with a 9-3 vote to hold rates steady, moving market participants from pricing a near-certain September hike to a more even view [^].
Current market sentiment implies one rate hike by year-end. As of August 2026, market participants are pricing in one rate hike for the remainder of the year, according to the CME FedWatch tool, which differs from expectations prior to the July 29 policy decision [^]. While the probabilities for the September meeting have been noted, detailed CME FedWatch probabilities for the subsequent October 27–28 and December 8–9, 2026, FOMC meetings are not available in the provided information [^][^][^][^][^][^].
9. Beyond inflation and jobs, what secondary economic indicators, such as consumer spending or manufacturing PMIs, are Fed officials highlighting in their Q3 2026 commentary?
| Primary Indicators of Focus | Private domestic final purchases and AI-related business investment are key [^][^][^][^][^] |
|---|---|
| Q3 Regional Commentary Emphasis | Fuel prices and tariff-related uncertainty impacting consumer spending and business sentiment [^][^] |
| Key Financial Variables | Financial conditions, credit availability, and elevated capital spending [^][^][^][^][^][^] |
Fed officials in Q3 2026 are closely monitoring a range of secondary economic indicators beyond headline inflation and employment figures. These include private domestic final purchases, AI-related business investment, energy price volatility, and market-based inflation expectations [^][^][^][^][^]. Additionally, officials are highlighting consumer spending, overall economic activity, and the prevailing state of financial conditions and credit availability [^][^][^][^][^][^].
The Federal Reserve's specific focus areas reveal deeper economic concerns and influences. Officials are specifically observing private domestic final purchases as a key measure of real GDP momentum and the broader impact of AI-related business investment [^][^][^][^][^]. Regional commentary from the Federal Reserve in Q3 2026 frequently emphasizes how fuel prices and uncertainty related to tariffs affect consumer spending and business sentiment [^][^]. Research from the Fed indicates that firms are gradually passing through tariff costs using a "trickle-up" pricing strategy, which contributes to extended inflationary pressures and ongoing economic uncertainty [^][^]. Furthermore, the availability of credit, demand on balance sheets, and heightened capital spending linked to the AI and investment cycle are significant variables under close watch [^][^][^][^][^][^]. It is notable that specific references to manufacturing PMIs were not present in the Q3 2026 commentary [^][^][^][^][^][^].
10. What Could Change the Odds
Key Catalysts
The Federal Reserve's federal funds rate target range stands at 3.50% to 3.75% as of August 8, 2026 [^] [^] [^] [^] [^] . Louis Fed" data-source-lanes="traditional">[^][^][^]. Financial markets and analysts are debating a potential 25 basis point rate hike at the September 15–16, 2026, FOMC meeting [^][^][^]. Prediction markets placed the probability between 53% and 56% as of early August 2026 [^][^][^]. The July 29, 2026, FOMC decision to hold rates included an unusual three-way dissent from members favoring an immediate 25 basis point increase, indicating internal pressure for further tightening [^][^][^]. Cleveland Fed President Beth Hammack also dissented at the July 28–29, 2026 FOMC meeting, advocating for higher rates due to persistent inflation concerns [^].
Key catalysts that could drive a September rate hike include elevated inflation data, particularly the August 12 Consumer Price Index (CPI) release [^] [^] [^] . Morgan Projects September Tightening" data-source-lanes="traditional">[^][^][^]. This August 12, 2026, CPI report is widely considered a critical binary event that will likely determine the Fed's policy trajectory for the September meeting [^][^]. Other factors include supply-chain shocks related to the ongoing Iran conflict and concerns about the Fed's inflation-fighting credibility under Chair Kevin Warsh [^][^][^]. Persistent inflation pressure from tariffs and higher business costs could also necessitate a restrictive policy [^][^][^][^][^][^][^].
Conversely, recent data has reduced expectations for a near-term hike. Weak July nonfarm payrolls, with 23,000 jobs lost, directly lowered September hike probabilities [^][^][^][^][^][^][^]. Following this jobs report, the probability of a 25 basis point hike reportedly fell from 56% to 44% [^][^][^][^][^][^][^]. Market expectations moved down 10 percentage points to 43% after the jobs data, with 10-year yields dipping to 4.65% [^][^][^][^][^][^][^]. New York Fed President John Williams stated in August 2026 that monetary policy is well-positioned for disinflation, though he left open future action if inflation persists above the 2% target [^]. The evidence suggests the next Fed move is more likely to be a pause than a hike, absent a material re-acceleration in inflation [^][^][^][^][^][^].
Key Dates & Catalysts
- Expiration: July 01, 2026
- Closes: January 01, 2028
11. Decision-Flipping Events
- Trigger: The Federal Reserve's federal funds rate target range stands at 3.50% to 3.75% as of August 8, 2026 [^] [^] [^] [^] [^] .
- Trigger: Financial markets and analysts are debating a potential 25 basis point rate hike at the September 15–16, 2026, FOMC meeting [^] [^] [^] .
- Trigger: Prediction markets placed the probability between 53% and 56% as of early August 2026 [^] [^] [^] .
- Trigger: The July 29, 2026, FOMC decision to hold rates included an unusual three-way dissent from members favoring an immediate 25 basis point increase, indicating internal pressure for further tightening [^] [^] [^] .
13. Related News
Last updated: August 8, 2026, 12:10 UTC
Weak Jobs Data Pushes Back Fed Rate Hike Timeline in Trading
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Next Fed rate hike? Surges +10.0pp
Expectations for a Federal Reserve rate hike before 2028 surged by 10 percentage points on July 30, 2026, reaching an 80% implied probability. This shift reflects growing market sensitivity to the FOM...
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Fed Rate Hike Bets for 2026 Fall After Warsh Testimony
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Fed's Hawkish Dot Plot Pushes 2026 Rate Hike Odds Above 50%
The Federal Reserve's sharply hawkish pivot at its June 17 meeting sent shockwaves through prediction markets, with traders rapidly pricing in a greater likelihood of an interest rate hike before the ...
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Fed Hike Market Prices Hawkish Shift, Pulls Timeline Forward to 2027
The prediction market for the next Federal Reserve rate hike has undergone a significant repricing, indicating a more hawkish outlook among traders. In a sharp shift, the probability of a hike occurri...
14. Historical Resolutions
Historical Resolutions: 1 markets in this series
Outcomes: 0 resolved YES, 1 resolved NO
Recent resolutions:
- FEDHIKE-26JUN30: NO (Jul 01, 2026)
