Will the Fed raise rates in October? Nobody can know before the 2:00 p.m. ET statement on October 28. The Fed raised rates in September, then the September reports ran hot: consumer prices rose 3.7% from a year earlier, above the 3.6% a Reuters poll had expected, and producer prices jumped 1.3% in a month, the most since March 2022.
Market-implied odds of an October hike rose after the consumer price report and eased after the producer price report, and published readings differ by source and time.
The rate at stake is the federal funds rate, the overnight rate banks charge each other, which the Fed steers through a target range. That range has been 3.75-4.00% since September 17, 2026, after the Federal Open Market Committee (FOMC), the Fed's rate-setting body, voted 12-0 to raise it by 25 basis points. A basis point is one hundredth of a percentage point. It was the first increase since July 2023.
Key Takeaways
- The decision comes at 2:00 p.m. ET on October 28, with a press conference at 2:30 p.m. ET and no new economic projections at this meeting.
- Headline CPI rose 3.7% and core CPI 2.6% from a year earlier, both above forecasts; the 0.6% monthly rise in headline CPI matched the Reuters poll.
- Producer prices for final demand rose 1.3% in September against a 0.6% forecast, with energy behind most of the rise in goods prices.
- Reported CME FedWatch odds of an October hike ranged from 28% to 50% on October 14 and 15, depending on outlet, time and question. They are market prices, not forecasts.
- In September, 16 of 18 Fed policymakers projected at least one more increase this year.
What the September 2026 CPI Showed: Headline vs Core
The Consumer Price Index (CPI) tracks the prices households pay for a basket of goods and services; core CPI leaves out food and energy, the most volatile categories. Month over month compares September with August, and year over year compares it with September 2025. Monthly figures are seasonally adjusted (SA), which strips out price patterns that repeat every year, such as holiday discounting.
September inflation reports at a glance
| Measure | September 2026 | August 2026 |
|---|---|---|
| CPI all items, year over year | 3.7% | 3.4% |
| Core CPI, year over year | 2.6% | 2.4% |
| CPI all items, month over month (SA) | 0.6% | 0.4% |
| Core CPI, month over month (SA) | 0.3% | 0.3% |
| Core CPI, 3-month annualized | 3.4% | 2.0% |
| PPI final demand, month over month (SA) | 1.3% | 0.5% |
| PPI final demand, year over year | 6.3% | 5.6% |
| PPI final demand less foods and energy, month over month (SA) | 0.7% | n/a |
| PPI final demand less foods, energy and trade services, month over month (SA) | 0.5% | 0.3% |
Headline CPI: 3.7% From a Year Earlier
All-items CPI rose 3.7% in the 12 months to September, up from 3.4% in August, and 0.6% from August, after 0.4% the month before. A Reuters poll had forecast 3.6% for the annual rate and 0.6% for the monthly change, so the annual figure came in above the forecast and the monthly figure matched it. The gap between headline and core, 3.7% against 2.6%, means food and energy prices rose faster over the year than the rest of the basket. The Fed defines its 2% inflation goal with a different gauge, the personal consumption expenditures (PCE) price index, so CPI feeds the debate rather than setting the target.
Core CPI and the Three-Month Pace
Core CPI rose 2.6% from a year earlier, up from 2.4% in August, and 0.3% on the month, the same pace as in August. Investing.com and InvestmentNews cited forecasts of 2.5% for the annual rate and 0.2% for the monthly change, so core came in above expectations on both counts.
Scaling the latest three months up to a yearly rate gives a faster read on momentum. On that basis, core prices rose at a 3.4% annualized pace from July through September, compared with 2.0% for the three months through August. A three-month pace catches shifts sooner than the 12-month rate but is noisier, because each month carries more weight. Here it shows core prices rising faster in recent months than over the year as a whole.
Why the 1.3% September PPI Jump Matters
The Producer Price Index (PPI) measures the prices domestic producers receive for what they sell. Its headline measure, final demand, covers goods, services and construction sold to households, businesses, government and export buyers.
Final demand prices rose 1.3% in September, seasonally adjusted, the largest monthly advance since a 1.7% rise in March 2022. August was revised to 0.5%, July was 0.2%, and the 12-month increase reached 6.3%. The September figures are preliminary. According to InvestmentNews, economists surveyed by Dow Jones Newswires and The Wall Street Journal had expected a 0.6% monthly rise.
Two core measures are separate series that are easy to confuse. Final demand less foods and energy rose 0.7% on the month. Final demand less foods, energy and trade services, which also removes wholesale and retail margins, rose 0.5% after 0.3% in August. Both were 5.0% higher than a year earlier. Trade services are the only difference between the two, so the September gap came from those margins.
Goods vs Services: Where the Rise Came From
Final demand goods prices rose 2.6% and services prices 0.8%. Final demand energy prices jumped 10.8% and accounted for more than 80% of the goods increase; gasoline alone, up 20.3%, accounted for half of the goods increase. In services, a 1.4% rise in trade margins, what wholesalers and retailers earn on the goods they resell, made up nearly half of the increase.
Why PPI Does Not Pass Straight Into CPI
Producer prices are often called pipeline prices because they capture costs before goods and services reach households, but they do not pass into consumer prices one-for-one. Final demand includes sales to businesses, government and export buyers that never reach a household budget, and the two indexes weight items differently. Companies can also absorb part of a cost rise in their margins, and the pass-through that does happen can take months.
September shows the margin effect. Producer prices for gasoline rose 20.3%, yet retail margins for automotive fuels fell 30.3%, which means pump prices rose by less than fuel retailers' costs that month.
Fed Rate Hike Odds: Why the Numbers Disagree
Headlines after the two reports quoted very different odds of an October hike, sometimes hours apart. Most of the spread comes from when each reading was taken and what exactly it measured.
What CME FedWatch Measures
Fed funds futures are exchange-traded contracts that pay out based on the average federal funds rate in a given month, so their prices reflect how traders collectively weigh possible rate paths. CME FedWatch is a tool that converts those prices into implied probabilities for each target range at upcoming FOMC meetings. The output is a market price, not a forecast, and it moves whenever futures prices move.
Reported Odds by Source and Time
Before the October 14 consumer price report, outlets including Reuters, Yahoo Finance and Axios cited CME FedWatch odds of about 22% for an October hike. Readings reported over the next two days:
Reported odds of an October hike
| Reported by | When (ET) | What it measures | Probability |
|---|---|---|---|
| Axios (Courtenay Brown) | Oct 14, after CPI* | Hike in October (peak) | 50% |
| Reuters (Kanishka Ajmera) | Oct 14, after CPI* | Hike in October | 47.1% |
| 24/7 Wall St. (AJ Tiarsmith) | Oct 14, 12:20 p.m. | Hike in October | 41.5% |
| Yahoo Finance (Keith Griffith) | Oct 14, 3:50 p.m. (published) | Hike in October | 35% |
| Yahoo Finance (Demian Bio) | Oct 15, 9:47 a.m. | No change; hike below 30% (meeting not named) | 70.7% |
| InvestmentNews | Oct 15, after PPI* | Hike to 4.00-4.25% in October | 33.8% |
| InvestmentNews | Oct 15, after PPI* | Exactly 4.00-4.25% after December 8-9 | 63.2% |
| Axios (Courtenay Brown) | Oct 15, afternoon | Hike in October | 28% |
Four Reasons the Readings Differ
- Snapshot time. Futures reprice continuously. On October 14 alone, reported readings ran from 35% to 50%, depending on when they were taken.
- The question asked. Most rows cover the October meeting alone. The 63.2% from InvestmentNews is the probability of a range of exactly 4.00-4.25% after the December 8-9 meeting. Because it excludes paths with two increases, it can be no higher than the probability of at least one hike by December.
- Hike or no change. Some outlets quote the chance of a hike, others the chance of no change. When almost no chance of a cut is priced, the two add up to roughly 100%, so 70.7% for no change and below 30% for a hike describe the same pricing.
- The instrument. Prediction markets, other models and surveys of economists frame the question differently from futures, so their numbers are not interchangeable with futures-based odds.
Each reading is a snapshot of prices at one moment, and the next one can look different.
What the Fed Has Said Since the September Hike
The September 16 Statement and Projections
The September 16 statement, approved 12-0 with no dissents, read: "The Committee decided to raise the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent, in support of the Federal Reserve's dual mandate." It added that "Inflation remains elevated" and that "Today's policy action will support a timelier return to the Committee's 2 percent goal." It contained no sentence about further adjustments.
The Summary of Economic Projections released that day put the median federal funds rate for the end of 2026 at 4.1%, which corresponds to 4.125%, the midpoint of a 4.00-4.25% range, one quarter point above the current range. Of 18 participants, 12 projected that level, 4 projected 4.375%, a quarter point higher still, and 2 projected 3.875%, the midpoint of the current range. In all, 16 of 18 projected at least one more increase this year. Projections are individual estimates, not commitments, and the next set comes with the December 8-9 meeting, not in October.
The minutes, released October 7, said most participants saw another increase as likely to be appropriate by year end, while noting that they "approached each meeting with an open mind."
Chair Warsh on Further Increases
At his September 16 press conference, Chair Kevin Warsh declined to signal the next move.
"This won't surprise you: I'm not in the forward guidance business.
— Kevin Warsh, Chairman, Federal Reserve (FOMC press conference, September 16, 2026)
He added, "I'm not going to prejudge any future decisions we make," and recalled his August remarks at Jackson Hole: "we're committed to a discipline, not to a decision." On October 16, at the IMF and World Bank annual meetings in Bangkok, he said, "I don't prejudge meetings," Axios reported, adding that since September "the world has broadly conformed to our expectations."
Recent Remarks and the Blackout Period
Other officials spoke between October 1 and October 16:
- Vice Chair Philip Jefferson, October 1: "I view risks to my inflation forecast as tilted to the upside."
- Governor Christopher Waller, October 8, who said he anticipates additional hikes if the data continue to come in as expected: "The hikes do not need to come at consecutive meetings, but they should be in place in an acceptable period of time."
- New York Fed President John Williams, October 13, in a Bloomberg News interview: "I haven't changed my view that it may be appropriate to have one more rate hike."
- Chicago Fed President Austan Goolsbee, October 14, in a Yahoo Finance interview reported by Reuters: "services inflation shows little sign of improvement."
- San Francisco Fed President Mary Daly, October 14, to Reuters: "We are more likely than not to need additional adjustments, but the timing of those adjustments to me is something we're still deliberating." Reuters reported that she sees no reason to act at the October meeting.
Goolsbee and Daly take part in the committee's discussions but were not among the 12 voters in September.
The blackout period is the window around each meeting when participants refrain from public comment on policy. It begins at 12:00 a.m. ET on the second Saturday before a meeting and ends at 11:59 p.m. ET on the day after, so this one runs from Saturday, October 17, to Thursday, October 29. Warsh spoke in Bangkok the day before it began.
What Treasury Yields Show, and What They Cannot
A Treasury yield reflects the expected path of the policy rate over the life of the security plus other forces: the term premium, which is the extra return investors demand for holding longer-dated bonds, growth expectations and the supply of new debt. Yields are context, not a probability. The figures below are daily par yields, the latest as of Friday's close (October 16, 2026).
Treasury yields around the reports
| Date | 3-month bill | 1-year bill | 2-year note | 10-year note |
|---|---|---|---|---|
| Sep 15 | 4.11% | 4.39% | 4.67% | 5.00% |
| Sep 16 (hike day) | 4.14% | 4.45% | 4.74% | 5.01% |
| Sep 28 | 4.28% | 4.59% | 4.92% | 5.24% |
| Oct 13 | 4.26% | 4.48% | 4.79% | 5.21% |
| Oct 14 (CPI day) | 4.28% | 4.53% | 4.82% | 5.19% |
| Oct 15 (PPI day) | 4.28% | 4.49% | 4.77% | 5.10% |
| Oct 16 | 4.26% | 4.46% | 4.74% | 5.09% |
The 2-year note yielded 4.74% on September 16, the day of the increase, and 4.74% again on October 16, after reaching 4.92% on September 28, the highest of the dates shown. On October 14, the day of the consumer price report, the 1-year bill rose from 4.48% to 4.53% and the 2-year note from 4.79% to 4.82%; by October 16 both were below their October 13 levels. The 3-month bill rose from 4.14% on September 16 to 4.26% on October 16. The table records the moves, not their causes.
A Hike or No Change: What Each Outcome Would Mean
The Evidence Cited on Each Side
Cited in support of a hike:
- CPI above forecasts on the annual headline rate and on both core measures, with a 3.4% annualized core pace over three months.
- Producer prices up 1.3% against a 0.6% forecast, the largest monthly rise since March 2022.
- Projections in which 16 of 18 participants saw at least one more increase this year, plus Goolsbee on services inflation and Jefferson on upside risks.
- Anshul Sharma, chief investment officer at Savvy Wealth, quoted by Reuters: "We think that puts an October rate hike back on the table."
Cited in support of no change:
- Headline CPI's 0.6% monthly rise, which matched the Reuters poll, and a producer price jump led by energy.
- Waller on hikes not needing consecutive meetings, Daly on timing, and Warsh's "I don't prejudge meetings."
- The September jobs report, released October 2: 29,000 jobs added, an unemployment rate of 4.2%, and July revised to a loss of 10,000 jobs.
- James McCann, senior economist at Edward Jones, quoted by Reuters: "Many Fed speakers have signaled that there is no need for a hike at the upcoming October meeting."
Neither list settles the question on its own.
A Quarter-Point Hike to 4.00-4.25%
A 25 basis point increase would lift the range to 4.00-4.25%, the level of the median end-2026 projection, in back-to-back moves. Rates tied directly to the federal funds rate would generally rise in step, and attention would turn to whether the statement and press conference leave room for another move in December.
No Change at 3.75-4.00%
The range would stay at 3.75-4.00%, and rates tied to it would stay where they are for now. The statement and press conference could still move market rates by shifting expectations for the December 8-9 meeting, when new projections arrive. With the median September projection pointing to one more increase by year end, a decision to wait would leave that question open.
Savers and Borrowers
- Savings and money market accounts: yields tend to follow the policy rate, but banks set them and can adjust slowly or only partly.
- Credit cards: many carry variable rates linked to the prime rate, which banks typically move with the federal funds rate, so those rates usually rise after a hike and stay put with no change.
- Adjustable-rate loans: these reset at set intervals against a benchmark index, so the effect depends on the loan's index and next reset date. Fixed-rate loans do not change.
- Treasury bills: bill yields trade on expected policy rates, so they already reflect what markets anticipate. The 3-month bill yielded 4.26% on October 16.
The full chain is explained in how a Fed rate change reaches savings, mortgage and credit card rates.
Stocks and Bonds
Higher policy rates raise companies' borrowing costs and the rate used to discount future profits, which tends to weigh most on companies whose value rests on earnings far in the future. Because markets price expectations in advance, the reaction on the day usually depends on the gap between the decision and what was priced, and on what the statement signals for the months ahead. A decision in line with pricing can move stocks and bonds less than a surprise in either direction. The channels are explained in how Fed rate decisions can move through stock portfolios.
What to Watch Before the October 27-28 FOMC Meeting
With the blackout under way, the remaining signals before the meeting are scheduled data releases:
- Tuesday, October 20, 10:00 a.m. ET: state employment and unemployment for September.
- Tuesday, October 20: housing starts and building permits for September.
- Wednesday, October 21, 10:00 a.m. ET: usual weekly earnings for the third quarter.
- Tuesday, October 27, 8:30 a.m. ET: advance report on durable goods for September.
- Tuesday, October 27: new home sales for September.
- Wednesday, October 28: statement at 2:00 p.m. ET, press conference at 2:30 p.m. ET.
Two major releases come after the decision: the advance estimate of third-quarter GDP and September personal income and outlays, which includes the PCE price index, are both due Thursday, October 29, at 8:30 a.m. ET. The October CPI follows on Tuesday, November 10. The meeting countdown and rate history are on the Money365.Market Fed Meeting Tracker.
Frequently Asked Questions
Will the Fed raise rates in October 2026?
That is not known until the 2:00 p.m. ET statement on Wednesday, October 28. The Fed raised its target range to 3.75-4.00% in September, and the September price reports came in above forecasts on several measures. Reported CME FedWatch odds of an October hike ranged from 28% to 50% on October 14 and 15, depending on when they were taken.
When is the Fed decision announced?
The statement is released at 2:00 p.m. ET on October 28, followed by Chair Kevin Warsh's press conference at 2:30 p.m. ET. This meeting has no Summary of Economic Projections; the next set comes with the December 8-9 meeting.
What is the current federal funds rate?
The target range is 3.75-4.00%, in effect since September 17, 2026, after a 25 basis point increase that was the first since July 2023. Before that, the range had been 3.50-3.75% since a cut announced on December 10, 2025, with no change at five meetings in 2026.
What is the difference between CPI and core CPI?
Core CPI excludes food and energy, whose prices swing the most, while headline CPI covers the full basket. In September, headline CPI was 3.7% higher than a year earlier and core CPI 2.6% higher.
What is CME FedWatch?
CME FedWatch is a tool that turns fed funds futures prices into implied probabilities for each possible target range at upcoming FOMC meetings. Its readings are market prices that change through the trading day, not forecasts, which is why figures quoted at different times can differ widely.
The Bottom Line
The September reports ran ahead of forecasts on several measures, led by a 1.3% jump in producer prices concentrated in energy. The Fed's September projections pointed to one more quarter-point increase by year end, several officials described the timing as open, and CME FedWatch odds of an October move rose from 22% to 50% after the consumer price report, then fell to 28% the next afternoon, Axios reported. The decision arrives at 2:00 p.m. ET on October 28.