The probability of a Federal Reserve interest rate hike at the upcoming October 28 meeting dropped to 18.3% on October 8, down from 37.6% on September 30, according to CME’s FedWatch tool. With rate cut odds sitting at 0%, financial markets are anticipating a rate hold following weaker-than-expected economic indicators.
Key Takeaways
- FedWatch probabilities show an 18.3% chance of an October rate hike, down from 37.6% in late September.
- US employers added only 29,000 jobs in September against expectations of 90,000.
- The core PCE price index rose 0.2% in August, below market forecasts.
- The 10-year Treasury yield reached 5.342% on October 1, marking a high not seen since early 2002.
- Short sellers lost $27.5 million in liquidations within an hour following the jobs data release, according to CoinGlass.
Macro Indicators Shift Fed Outlook
Employers in the United States added just 29,000 jobs in September, significantly missing forecasts of approximately 90,000. Concurrently, the core Personal Consumption Expenditures (PCE) price index increased by 0.2% in August, coming in below projections. Fed Vice Chair Philip Jefferson and New York Fed President John Williams both indicated that central bank officials are in no rush to implement immediate policy changes.
Despite the cooling labor market, underlying inflationary risks persist. Crude oil rose roughly 14% in the month leading up to September 29, breaching $96 per barrel. Furthermore, minutes from the September FOMC meeting revealed that 16 of 18 Fed officials view another rate increase as appropriate, with Goldman Sachs forecasting that the next hike could occur in December instead.
Yield Dynamics and Impact on Bitcoin
When the weak employment data was published, Bitcoin spiked immediately, triggering $27.5 million in short position liquidations within one hour, per CoinGlass data. However, broader market conditions remain constrained by high borrowing costs, as the 10-year Treasury yield hit 5.342% on October 1, reaching its highest level since 2002.
Analyst Benjamin Cowen noted that bond investors fear the central bank may tighten monetary policy insufficiently, which continues to drive yield expansion. Cowen expects this bond market anxiety to peak near the October 28 FOMC decision. Market participants are now looking toward the October 14 inflation report to gauge whether macroeconomic pressure on digital assets will ease.
Why It Matters
A pause in Fed rate hikes offers short-term relief for risk assets like Bitcoin, preventing an immediate tightening of financial conditions. However, elevated bond yields and persistent energy inflation mean the macroeconomic environment remains restrictive. Investors must closely monitor whether a rate hold in October simply delays further tightening into December, which could limit sustained bullish momentum across crypto markets.
