Fed decisions (Sep–Dec)

The first leg of the sequence is already in place, which is the biggest reason the Yes case remains alive. The Fed did hike in September, and the post-meeting guidance still left room for another increase before year-end. That matters because this market is not asking whether the Fed will tighten at all, but whether it will do so in exactly the pattern of hike, then pause, then hike. The September move and the minutes both suggest the Committee is still biased toward additional tightening unless incoming data meaningfully softens.

The main uncertainty sits in October. Market pricing has shifted strongly toward a hold, and that makes a pause the most plausible outcome for the second meeting. Softening labor data and the Fed’s willingness to wait for more information both support that view. At the same time, October is not a dead meeting for action: a hotter-than-expected inflation print, especially in core measures, could easily keep a hike on the table. So the second leg favors Yes, but it is still data-sensitive enough that the market should not assign it near-certainty.

December is the strongest support for the Yes outcome, because current expectations already lean heavily toward another hike by then. If the Fed pauses in October and inflation remains sticky, a December move fits the broader tightening narrative and matches what several institutions and futures markets currently anticipate. The biggest danger is that the Fed may decide to front-load the second hike in October instead of December, or that weaker inflation and growth data could remove the need for any additional move. That timing risk is exactly why the sequence is plausible but not overwhelmingly certain.