Another Fed rate hike in 2026?
Leaning Yes: the market is already signaling about an 80% chance of a December hike, and the October 28 FOMC split 10-2 with two dissents for an immediate increase. That keeps the December 8-9 meeting as the most likely place for another move.
Analysis
The freshest signal is the October 28 FOMC decision: the Fed held rates at 3.75%-4.00% but had two dissents in favor of a hike. That is a hawkish hold, and it leaves December 8-9 as the key decision point for this market.
Recent pricing is still near 79%-80% for a December hike, which matches the direction of the Fed signals. The main reason to stay a bit above the market price is that elevated inflation and the recent dissent pattern make a hike more likely than a pause, unless upcoming labor data softens sharply.
Arguments
For
- The Fed already delivered a hawkish hold on October 28, which usually means the next meeting remains live for action.
- Inflation has stayed elevated enough that a 25-basis-point hike would fit the recent tone of Fed communication.
- The market has been pricing a December hike close to 80%, so the consensus view is already strongly tilted to Yes.
Against
- The September payrolls print was only 29,000, which leaves room for a weaker labor-market narrative to slow the Fed down.
- If the next two jobs reports soften meaningfully, the Fed may decide to wait rather than tighten again in December.
Key drivers
- Two FOMC members dissented on October 28 in favor of an immediate 25-basis-point hike, showing real internal pressure for tighter policy.
- Market-implied odds for a December 9 hike were reported around 79%-80% on November 4-5, which supports a high Yes probability.
Risk factors
- The October 6 employment report on November 6 could weaken the case for a hike if it shows a clear labor-market slowdown.
- The November 2026 jobs report on December 4 is the last major data point before the decision and could still push the Fed to hold if it looks soft.
Scenarios
Best case
If the November 6 and December 4 jobs reports both come in resilient and inflation stays sticky, Yes rises to about 88%.
Most likely
Most likely the Fed either hikes on December 8-9 or keeps the option extremely open until then, with Yes around 81%.
Worst case
If the November 6 report and especially the December 4 report show clear labor-market weakening, Yes falls to about 65%.
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