Markets Expect the Fed to Hold Rates Steady This Week
Markets were pricing a 90% probability that the Federal Reserve would hold interest rates steady at its October meeting, according to CME. The decision arrives Wednesday, the final day of the Fed's October 27-28 meeting. Treasury yields were mixed ahead of it.
The rate in question is the federal funds rate, the target for the overnight rate at which banks lend reserves to one another. Those reserves are the cash banks hold with the central bank. A Reuters poll expected the Fed to keep that rate in a 3.75%-4.00% range. A hold would leave the target unchanged, and with it the benchmark that feeds into floating-rate loans, adjustable mortgages and many short-term deposit rates.
Yields are the annual return on a bond, and they move inversely to its price, so when a bond's price falls its yield rises. When yields are described as mixed, moves across maturities point in different directions, so no single signal dominates the curve. That tends to happen when traders are waiting for a catalyst rather than repositioning on a new view.
The rate backdrop has been more contested than a simple hold would suggest. In June, Treasury yields turned higher after Federal Reserve officials hinted that their next move could be a rate increase. That signal sits in the background of this week's pricing. Traders who had priced a hike path in the summer now face a meeting where the consensus is no change.
The Fed holds eight regularly scheduled meetings a year. The next one after this week is set for December 8-9, 2026, and it is associated with a Summary of Economic Projections, the Fed's compilation of economic forecasts for growth, inflation and the policy rate. Those projections will carry more information about the path of policy than a single held rate does.
In my view, the 90% figure matters less as a forecast than as a measure of how much the decision is already in prices. Market-implied probabilities reflect what traders are paying for, not what the Fed has committed to. A hold at 90% odds should move yields less than a surprise would, which is why attention shifts to the wording of the statement and to whatever the Fed says about the months ahead.
Equities are moving on a separate track. Bloomberg reported in January that Microsoft, Amazon, Alphabet and Meta were expected to spend roughly $475 billion on capital expenditures in 2026, up from $230 billion in 2024. Capital expenditures are long-lived investments such as data centers and equipment. In late October, Bloomberg reported that the Bloomberg Magnificent Seven Index was up 6.5% year-to-date, compared with an 11% rise in the S&P 500.
That gap means the broader index has outpaced the group of mega-cap technology stocks whose spending plans were the focus of those January estimates. For rate-focused readers, the scale of that spending matters because it draws on corporate borrowing capacity and on investor appetite for long-dated paper. Any shift in that appetite would reach the Treasury market through the same channels that the Fed's policy decisions do.
What to watch this week is the Fed's statement and the press conference that follows it, along with where yields settle once the outcome is known. The decision itself is scheduled, and the odds going into it are high. What the Fed says about the next move is the open question.
