Fed Holds Rates, but Two Officials Push for Hike as Polymarket December Odds Hit 82%

The Federal Reserve held interest rates steady Wednesday, but two policymakers voted for another hike, highlighting concern over persistent inflation.

The Federal Open Market Committee voted 10–2 to maintain rates at 3.75%–4.00%, with Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack both favoring a quarter-point increase.

It was Cook’s first dissent since joining the Fed in 2022, coming as President Donald Trump has repeatedly sought to remove her from office.

The Fed’s statement described economic activity as expanding strongly, with resilient domestic spending and robust investment, despite continued geopolitical uncertainty.

“Inflation remains elevated,” the committee said.

Polymarket Sees December Hike Odds Climb

On Polymarket, traders now assign an 82% probability to a 25-basis-point increase in December, up from roughly 77% before Wednesday’s announcement.

The market has attracted more than $5.3 million in trading volume, with traders focused on whether Fed Chair Kevin Warsh will signal another increase before year-end.

Jesse Marre, senior portfolio manager at Hilbert Group, had expected the Fed to hold off until December rather than surprise markets with an immediate hike.

“I would be very surprised if the Fed shocked the market with a hike that is neither immediately required nor urgent when it can go in December instead,” Marre said ahead of the announcement.

Inflation Pressures Persist Despite Weak Hiring.

Despite September’s weak jobs report, which showed employers added just 29,000 positions, the Fed said job gains have kept pace with the workforce and unemployment has changed little.

Inflation-data provider Truflation forecasts September’s Personal Consumption Expenditures (PCE) inflation at 3.6% annually, up from 3.4% in August.

Its estimates show gasoline and other energy goods rising 33.7% year over year, amid surging oil prices and supply disruptions linked to the Iran war.

Last week’s rising crude prices helped push the Energy Select Sector SPDR Fund (NYSE:XLE) to a record high.

If oil remains elevated, it could strengthen the case for another rate hike in December, even with hiring weak.

The official PCE report arrives Thursday at 8:30 a.m. ET, alongside third-quarter GDP figures. Hotter-than-expected inflation or stronger economic growth could reinforce bets on a December hike, while softer data may ease pressure on the Fed.

That could have significant implications for the tech-heavy Invesco QQQ Trust (NASDAQ:QQQ), as higher interest rates tend to weigh on growth-stock valuations.

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