Why traders see a December Fed hike and what could change it

Short answer

Traders expect a December Fed hike largely because the Fed's own September projections point to one. The median official saw end-2026 rates at 4.1%, which corresponds to a 4.125% midpoint, one quarter point above today's 3.875%. On October 24, Polymarket priced a 74% chance of a 25 bp hike at the December 8-9 meeting.

• What happened The Fed raised rates 25 bp to 3.75-4.00% in September, in a 12-0 vote.
• Why it matters The median projection implies one more quarter-point hike in 2026.
• What is priced Polymarket showed 74% for a 25 bp December hike on October 24.
• What to watch October 27-28 meeting, September PCE, October CPI on November 10.

Last checked 2026-10-24

Key facts

Current fed funds target range	3.75-4.00% (effective September 17, 2026)
September 2026 vote	12-0 for a 25 bp hike
Median end-2026 rate projection (Sep SEP)	4.1%
September CPI, 12 months	3.7% headline, 2.6% core
August PCE, 12 months	3.4% headline, 3.0% core
Polymarket, 25 bp December hike	74% (as of Oct 24, 2026)

What did the Fed do in September?

At its September 15-16, 2026 meeting, the Federal Open Market Committee raised the federal funds target range by 1/4 percentage point to 3-3/4 to 4 percent. According to the Fed's open market page, the change took effect September 17. It is the only rate move of 2026 so far.

Every voter backed it in a 12-0 vote. In its statement, the committee said inflation remains elevated and that the hike "will support a timelier return to the Committee's 2 percent goal."

A long hold came first. Rates stayed at 3-1/2 to 3-3/4 percent from January through July. In July, three officials, Beth Hammack, Neel Kashkari and Lorie Logan, dissented in a 9-3 vote because they wanted a quarter-point increase then. By September, the rest of the committee had moved to their position.

Why do traders expect another hike in December?

The clearest signal comes from the Fed itself. In the September Summary of Economic Projections, the median participant saw the federal funds rate at 4.1% at the end of 2026. That figure is the 4.125% midpoint, rounded. With the current midpoint at 3.875%, the median implies one more quarter-point hike this year.

In the September dot plot, 12 of 18 participants put end-2026 at a 4.125% midpoint, one hike away. Four put it at 4.375%, which would mean two more hikes. Two saw no further change, at 3.875%.

The Fed's own inflation projections also sit above the latest readings. Officials projected 2026 PCE inflation at 3.7% and core PCE at 3.4%. The most recent BEA data, for August, showed PCE at 3.4% and core PCE at 3.0% from a year earlier. If officials expected inflation to rise further by year end, that helps explain why most of them penciled in more tightening.

Two FOMC meetings remain in 2026: October 27-28 and December 8-9. Only December comes with new projections, so it is the natural point for officials to deliver, or drop, the hike their September median implied.

What does the latest inflation data show?

Energy is doing most of the work in the headline numbers. September CPI rose 0.6% on the month and 3.7% over 12 months, according to the Bureau of Labor Statistics. The energy index rose 5.2% in September and 20.4% over the year. Gasoline rose 9.1% on the month and 34.2% over the year. Energy prices have surged during the 2026 Iran war and disruption in the Strait of Hormuz.

Strip out food and energy and the picture is calmer, but not uniform. Core CPI rose 0.3% in September and 2.6% over 12 months. On the Fed's preferred gauge, core PCE, which excludes food and energy, was 3.0% in August. The two core measures are diverging.

That gap matters for reading the Fed. The July statement linked elevated inflation partly to supply shocks, including energy. Central banks sometimes look past supply shocks, but the September statement focused on the overall level of inflation and the 2% goal. Watch whether the September PCE report and October CPI show energy-driven headline inflation spreading into the core measures. That is the question the December statement will have to answer.

Measure	Monthly change	12-month change	Data month	Source and release date
CPI, all items	0.6%	3.7%	September 2026	BLS, Oct 14, 2026
CPI, core	0.3%	2.6%	September 2026	BLS, Oct 14, 2026
CPI, energy	5.2%	20.4%	September 2026	BLS, Oct 14, 2026
PCE price index	0.3%	3.4%	August 2026	BEA, Sep 30, 2026
PCE, core	0.2%	3.0%	August 2026	BEA, Sep 30, 2026

What are prediction markets pricing for December?

As of October 24, 2026, Polymarket priced a 74% chance that the Fed raises rates by 25 bp at the December 8-9 meeting. These are trader-implied probabilities, not Fed guidance, and they can move quickly.

Here is how to read the price. Each contract pays out in full if its outcome happens and nothing if it does not, so its price works as a probability. The December hike contract had a bid of 0.73 and an ask of 0.75. The midpoint, 0.74, is the 74% figure. The last trade was 75 cents, which is why it looks slightly higher than the quoted odds. The contract page showed reported market volume of 1,086,060.

The five December brackets in the table add up to a little more than a full probability. Treat each figure as approximate, not exact.

One detail in the market rules is easy to miss. The December contract resolves on the change in the upper bound of the target range versus its level just before the December meeting. An October hike would not count toward it. If the Fed moved in October, the December question would start from the new level. If the Fed changes the rate by an amount not shown in the brackets, the rules round the change up to the nearest 25 bp.

For the October 27-28 meeting, Polymarket priced no change at 93.5% and a 25 bp hike at 6.5%. Taken together, traders were treating October as a pause and December as the likely date for the next move.

Availability: Polymarket is not available in every country or region. Whether you can use it depends on the laws where you live, so check local rules first. We cite its prices only as a market signal, not as a recommendation to trade.

December 8-9 outcome	Polymarket price
25 bp hike	74%
No change	23%
50+ bp hike	2.95%
25 bp cut	0.65%
50+ bp cut	0.45%

What could change the odds before December 8-9?

The Fed is also under new leadership. Kevin Warsh took office as Fed Chair on May 22, 2026, for a term running to May 21, 2030. Jerome Powell remains a Board member. December will bring the first full set of projections since the September hike.

Four dates can move the December odds:

• October 27-28: FOMC meeting. Markets priced a 93.5% chance of no change as of October 24. The statement wording will be read for signals about December.
• Late October: the September PCE report, the Fed's preferred inflation gauge.
• November 10, 8:30 a.m. ET: October CPI, the last CPI report before the December meeting.
• December 8-9: FOMC meeting with a new Summary of Economic Projections and dot plot.

What this page does not tell you

This explainer covers what the Fed has said, what the latest data show and what one market prices. It is general information only. It is not financial or investment advice, and it is not a forecast of what the Fed will do. Prediction market access varies by country, so check local rules.

One date could not be confirmed:

• The exact release date of the September PCE report (due late October) was not confirmed from the BEA schedule.

FAQ

Sources

• FOMC statement, Sep 16, 2026
• Summary of Economic Projections, Sep 16, 2026
• FOMC statement, Jul 29, 2026
• FOMC meeting calendar
• BLS CPI news release (September 2026)
• BEA Personal Income and Outlays, August 2026
• Polymarket: Fed Decision in December
• Polymarket: Fed Decision in October

Figures change. Check the primary sources below.