Traders are increasingly convinced the Federal Reserve will raise interest rates next week. Polymarket puts the chance of a quarter-point increase at 82%, up from 61% before the latest inflation reports. The chance of rates staying unchanged has fallen to just 18%, while a cut is barely in the conversation.
The decision comes Wednesday, September 16. The question is whether this week’s economic news gives the Fed enough reason to act immediately, or whether traders have become too confident about a decision that still has arguments on both sides.
Fed Rate Hike Odds Tracker
It is easy to see why expectations have shifted. Consumer prices rose 0.4% in August, leaving annual inflation at 3.4%. Gasoline was a major contributor, rising 3.9% during the month. Meanwhile, inflation excluding food and energy picked up from July, suggesting the pressure extended beyond the gas pump.
The jobs report also made it easier to argue for higher rates. Employers added 162,000 jobs in August, and unemployment held at 4.1%. That gives the Fed more room to focus on inflation, with less immediate concern that another increase would hit an already weakening job market.
Where the market stands
On Polymarket's "Fed Decision in September?" market, things are moving.
Together, those reports strengthen the case for a hike: hiring is holding up, and prices are still rising faster than policymakers would like.
But there is another side to the inflation report. Core inflation, which excludes food and energy, fell to 2.4% over the past year even as its monthly pace increased. That leaves the Fed weighing longer-term progress against a more worrying recent reading. Gasoline also accounted for more than a third of August’s overall price increase.
That gives officials a reasonable argument for waiting. They could leave rates unchanged, acknowledge the latest concerns, and look for more evidence that inflation is picking up before making borrowing more expensive again.
The markets also offer an interesting view of what happens beyond next week. A separate Polymarket contract gives the Fed a 90% chance of raising rates at some point in 2026. Taken together with September’s prices, that implies roughly a 40% chance of a later hike if the Fed leaves rates unchanged this month.
In everyday terms, traders expect the hike to happen now. If it doesn’t, these prices suggest they would lean toward no hike for the rest of the year. That is an estimate drawn from today’s prices; the outlook could change with the next economic report.
The Trade
At 18 cents, unchanged rates is the side I find more interesting. I think it’s likely they hike, but paying 82cents is too expensive for me right now. If it dips ahead of Wednesday, I might look at that side.
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