This is still shaping up to be the biggest story of the second half of October.
If these probabilities hold, the market is DEMANDING a rate hike on October 28th, a week before the midterms. Trump will lose it, and Warsh will become the new Jay Powell.
If these probabilities hold, it means the market has lost patience with the Fed's easy policy over the last two years, which is why long-term yields rose during a 2024 to 2026 easing cycle for the first time in 50+ years (see the repost below).
If the Fed sits idle while the market prices in a rate hike, long-term yields could spike off the top of the page.
Of course, payrolls, CPI, retail sales, or Q3 earnings could disappoint, and that probability could drop to well under 50%. But if it doesn't, Warsh might be in an impossible situation.
1/2
Wall Street overwhelmingly believes the Fed will NOT hike on October 28, as it is a week before midterm election day.
Makes sense... so why is the market still pricing in a >50% chance of a hike?