Why October looks quieter
A thin hiring month changed the mood. September payroll growth came in at just 29,000, well below forecasts/) that topped 80,000. That softer labor backdrop landed alongside cooler readings in the Fed's favored inflation gauge, tilting the conversation toward patience rather than urgency.
The latest probability read
Traders have pulled back on October. CME's FedWatch now assigns a 17% chance of a quarter point increase, versus close to 36% a week earlier. On prediction market platform Kalshi, the odds are 18%, down from almost 70% the prior week. Even so, markets still lean toward action later this year: probabilities sit above 75% for a December increase on FedWatch, with Kalshi at 65%.
Inflation context and the Fed's balancing act
Midweek, the personal consumption expenditures price index showed cooler than anticipated inflation. In August, the core PCE index - stripping out food and energy - was up 3%, coming in softer than the 3.3% consensus. That fits a narrative of gradual disinflation and a labor market that is softening rather than cracking.
"This report strengthens the case for the Federal Reserve to remain patient," said Adam Schickling, who serves as a senior economist at Vanguard. The central bank raised rates in September to fight inflation that has stayed above target for five years, and is weighing its dual goals of full employment and stable prices.
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What this means for your money
The takeaway for everyday wallets: the near term path looks steadier, but December is still in play. If hiring cools and inflation continues to ease, policymakers may feel less pressure to move in October. The Fed will announce its next interest rate decision at the end of a two day policy meeting on Oct. 28.
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