The Federal Reserve held interest rates steady on 28 October 2026. The Federal Open Market Committee voted 10–2 to keep the target range for the federal funds rate at 3.75% to 4.00%, with Lisa D. Cook and Beth M. Hammack preferring a quarter-point increase. That decision is confirmed fact, taken from the Committee’s own statement. What the market expects the Fed to do next is a different kind of fact: a price, not a decision, which changes every trading day.
The best-known summary of that price is the CME FedWatch tool. On the afternoon of 28 October, after the Fed’s decision, reporting of the tool put the probability of a rate increase at the December meeting at roughly 85% to 86%. By 29 October, Reuters reported traders pricing in about a 78% chance of a December hike, compared with about 84% before the announcement — a reported market pricing, date-stamped to 29 October 2026, which had already moved several percentage points in the previous week. This explainer sets out what the tool is, how its probabilities are calculated, what the current December reading shows, why the reading moves, and why even a reading as high as 85% or 90% is not a promise that the Fed will act. It gives no personal financial advice, and it makes no prediction of its own about December.
What the CME FedWatch tool is
The CME FedWatch tool is a free forecasting display published by CME Group, which operates the Chicago Mercantile Exchange and the Chicago Board of Trade. It is one of the most widely cited references in financial journalism for market expectations about Federal Reserve decisions.
The tool does not survey economists or ask traders to vote. It converts prices from a real market — 30-day federal funds futures on CME Group exchanges — into probabilities for each possible outcome at each FOMC meeting: hold, raise by 25 basis points, raise by 50, cut, and so on. A basis point is one-hundredth of a percentage point; 25 basis points is the Fed’s usual single step.
The display is organised meeting by meeting. For each FOMC meeting it shows a distribution of probabilities across the possible target ranges, adding up to 100%. A headline number summarises that distribution; a high probability for one outcome means low probabilities for the others, never certainty.
How the probabilities are calculated
The calculation starts with federal funds futures. A 30-day federal funds futures contract settles against the average daily effective federal funds rate — the overnight rate at which banks lend reserves to each other — during a calendar month. Contracts are quoted as 100 minus the implied rate: a contract at 96.25 implies an average rate of 3.75% (100 − 96.25). If the price falls, the implied rate rises, and vice versa.
The FedWatch calculation compares the implied rate with the FOMC’s current target range. If it falls inside the range, the market expects no change; above it, an increase; below it, a decrease. Because meetings often fall part-way through a month, CME uses contracts for surrounding months, together with the meeting’s timing within the month, to estimate the change priced around that meeting. Outcomes are standardised into 25-basis-point increments, and for meetings further ahead the tool builds a probability tree linking possible outcomes from one meeting to the next. Investopedia’s explainer, drawing on CME Group’s methodology documents, stresses that probabilities are updated daily and reflect market sentiment, which “can change quickly”.
A simplified illustration shows the logic. Suppose futures imply rates should rise by 0.15 percentage points around a meeting, and the only outcomes allowed are no change or a 25-basis-point rise. Dividing the expected change by the step size (0.15 ÷ 0.25) gives 0.60 — roughly a 60% probability of a rise, 40% of no change. That illustrates the arithmetic, not CME’s actual, more sophisticated model. The number is a market-implied reading from traded prices, not a count of opinions or a statement by the Fed.
Two consequences follow. First, the probabilities embed everything affecting futures prices, including traders’ positioning and risk appetite — a probability can move because traders adjust hedges, not only because they change their minds about the economy. Second, the traders are mainly banks, asset managers and other institutions: the reading pictures institutional positioning, not a poll of households, businesses or economists.
What the decision on 28 October actually was
The FOMC’s statement, released at 2:00 p.m. Eastern Time on 28 October 2026, said: “The Committee decided to maintain the target range for the federal funds rate at 3-3/4 to 4 percent, in support of the Federal Reserve’s dual mandate.” It described activity as “expanding at a strong pace” and added: “Inflation remains elevated.” Its guidance sentence — “The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2 percent goal” — made no December commitment. The vote was 10–2, with Lisa D. Cook and Beth M. Hammack preferring a quarter-point rise. The next meeting is 8–9 December 2026, with new economic projections due. For the full account, see our explainer on the Federal Reserve’s October 2026 rate decision.
What the current December reading shows — date-stamped 29 October 2026
As of 29 October 2026, Reuters reported traders pricing in about a 78% chance of a hike in December, compared with about 84% before the 28 October announcement. The day before, Daily Economics put the probability of any increase at 86.0% on 28 October, up 7.7 points from 78.3% on 27 October; CNBC-cited reporting put it at roughly 85% on Wednesday afternoon — a market leaning heavily towards a December increase immediately after a hold, which then eased back.
The reading had not been stable: 94.8% on 21 October, 78.3% on 27 October, then up again after the statement — a swing of more than 16 points in a week, without any change in the policy rate. A reader who saw only one day’s figure would have formed a different impression of how settled December was.
| Date (2026) | CME FedWatch probability of a December increase | Source of the reported figure |
|---|---|---|
| 21 October | 94.8% | Daily Economics, reporting CME FedWatch |
| 27 October | 78.3% | Daily Economics, reporting CME FedWatch |
| 28 October (after the decision) | 86.0% (roughly 85% in CNBC-cited reporting) | Daily Economics / CNBC, reporting CME FedWatch |
| 29 October | About 78% | Reuters, reporting CME FedWatch |
The 29 October figure is the latest verified here. It will almost certainly have changed by the time it is read; republishing a figure without its date is misleading.
Surveys told a different story: in a CNBC survey of 30 economists, strategists and fund managers, 76% expected a December hike and 93% an October pause. The December survey figure (76%) was lower than the futures-implied figure (about 85%) — a survey records what forecasters say they expect; FedWatch records what traders are willing to pay. When they disagree, expectations are divided and uncertain.
Why the probabilities move
The December probability moves for the same reasons any market price moves: new information arrives, and traders reprice. Four kinds of information matter most between now and December.
First, inflation data. The statement said inflation “remains elevated”. The September PCE report and the first estimate of third-quarter growth were both due on 29 October, with further reports due before December. A hotter print pushes the probability of a hike up; a softer print pushes it down. Energy prices are part of this channel: see our explainers on diesel prices and what US consumers face on fuel prices.
Second, the labour market. The Fed has a dual mandate, so hiring data pull against inflation data: weaker hiring argues against tightening, stronger hiring removes an argument for patience.
Third, what Fed officials say. Because the statement made no December commitment, every subsequent remark is read for clues. The statement’s shift to a “strong pace” from September’s “solid” was itself treated as information, and the December probability rose on the day.
Fourth, events outside the Fed’s control, including geopolitical developments and energy-market shocks. The October statement noted that uncertainty “remains elevated owing, in part, to geopolitical developments”. An oil-price shock or a sharp move in bond yields can change the inflation outlook, and therefore the priced probability, without any new domestic data. The decision fell six days before the 2026 midterm elections, which formed part of the reported context — but the FedWatch reading measures market pricing, not political prediction.
Why a 90% chance is not a promise
A probability of 85% or 90% sounds close to certain in everyday language. In market terms it is not. Three distinctions explain why.
First, a market-implied probability is not a frequency. Saying there is an 85% chance of a December hike does not mean that in 85 out of 100 similar situations the Fed hikes. There is only one December meeting. The number summarises how traders have priced the balance of risks today, not a fixed likelihood for a one-off decision taken on information not yet available.
Second, the probabilities have moved sharply before. Ahead of the October meeting, pricing heavily favoured a hold, and the Fed did hold — but the December probability swung by more than 16 points in a week around that meeting. A tool that can move 16 points in a week should be quoted with its date and with humility. Investopedia’s explainer makes the same caution: the tool reflects market sentiment, which can change quickly.
Third, the Fed is not bound by market pricing. A heavily priced December hike could still not happen if incoming data soften; a lightly priced one could still happen if inflation surprises. The two hawkish dissents in October show support for tightening inside the Committee, but dissents are not decisions: eight other voting members chose to wait. The December decision will be taken on the day, on the data then available, with new projections published at that meeting.
None of this makes the tool useless. Used properly, it is a concise summary of where institutional money currently stands, and a change in the reading is genuine news about market sentiment. The error is to convert a summary of sentiment into a prediction, and then treat the prediction as the Fed’s plan. Headlines that say “the market expects” are accurate; headlines that say “the Fed will” on FedWatch alone are not. When a headline quotes a FedWatch probability, ask: which meeting, what date, which exact outcome, and what else is quoted alongside it? Treat the figure as a live gauge to be re-checked, not a verdict to be remembered.
Frequently asked questions
What is the CME FedWatch tool?
A free CME Group display converting 30-day federal funds futures prices into probabilities for the Fed’s target-rate decision at each FOMC meeting. It measures market expectations, not Fed intentions.
How are CME FedWatch probabilities calculated?
From futures prices. Each contract implies an average federal funds rate (100 minus the contract price). CME compares the implied rate with the FOMC’s target range, standardises outcomes into 25-basis-point increments, and builds a probability tree across meetings. Probabilities are updated daily.
What is the current probability of a December 2026 rate hike?
As of 29 October 2026, Reuters reported traders pricing in about a 78% chance of a December hike (CME FedWatch). It was 94.8% on 21 October, 78.3% on 27 October and about 86% on 28 October. Re-check the tool.
Does a high FedWatch probability mean the Fed will hike?
No. Traders have priced a high likelihood on today’s information. The Fed decides on incoming data, made no December commitment, and the probability moves with every data release.
Updated: 29 October 2026. The December probability in this article is date-stamped to 29 October 2026 and will have moved since. For the current reading, see the CME FedWatch tool.
Sources
- Federal Open Market Committee statement, 28 October 2026, text via Dow Jones/Morningstar — https://www.morningstar.com/news/dow-jones/2026102810686/text-of-feds-october-monetary-policy-statement
- Investopedia, “Understanding the CME FedWatch Tool: Predicting Fed Rate Changes” — https://www.investopedia.com/cme-fedwatch-tool-7559817
- Daily Economics, “Fed Holds, December Hike Odds Jump”, 28 October 2026 — https://dailyeconomics.substack.com/p/fed-holds-december-hike-odds-jump
- SourceFirst News, “Fed holds rates steady in October 2026 as 2 officials seek a hike”, 28 October 2026 — https://sourcefirstnews.com/fed-holds-rates-october-2026-cook-hammack-dissent-hike