Traders see 45% chance of September Fed rate hike

The Federal Reserve’s September meeting is shaping up to be the most suspenseful policy decision of 2026, and traders are essentially split down the middle on what happens next. CME FedWatch Tool pricing currently implies a 45% probability that the Fed will hike rates by 25 basis points at its September 16-17 FOMC meeting. The numbers driving the debate The current federal funds rate target sits at 3.50-3.75%, where the FOMC has parked it since July 2026. Consumer inflation clocked in at 4.2% as of May 2026, a reading that sent rate hike expectations climbing and reminded everyone that the Fed’s inflation fight is far from over. Before the May inflation report landed, the probability of a September hike was hovering just under 50%. The hot print briefly pushed expectations higher, but subsequent data pulled them back. A disappointing July jobs report, in particular, recalibrated the math toward holding rates where they are. By early August, the odds for a September hike settled into the 45-48% range, while the probability of a hold edged up to roughly 52%. Looking further out, approximately 60% of market participants expect a rate hike by the October FOMC meeting. Why this decision...