Fed rate hike odds fall to 38% as Waller awaits CPI

September rate-hike odds have fallen to 38% on Polymarket after Federal Reserve Governor Christopher Waller said cooling August inflation could persuade him to support holding rates steady.

Waller makes August CPI the Fed rate hike test

The Federal Reserve said in Waller’s published remarks on Sept. 3 that his decision at the September Federal Open Market Committee meeting would depend heavily on the next inflation report.

With employment near what Waller called its maximum sustainable level, he said inflation has continued to move slowly toward the central bank’s 2% goal. Another jobs report and a fresh inflation reading will arrive before officials meet on Sept. 15–16.

Waller does not expect the employment report to differ greatly from recent labor data. Instead, the August inflation figures will carry more weight in deciding whether he supports keeping the federal funds rate at its present range of 3.50% to 3.75%.

“If there is continued progress toward our 2 percent goal, then I am willing to support holding the policy rate at its current level,” Waller said.

A hotter reading would change his position. Waller said he would consider a rate increase if inflation accelerated, partly because he believes the current policy setting is only slightly restricting demand.

“If there is evidence that progress toward 2 percent inflation reversed in August, a small adjustment in our stance would help ensure that it resumes.”

Waller described the position as conditional rather than a commitment to a particular vote. According to the governor, explaining how economic data could affect his decision allows households, companies, and investors to prepare for different policy outcomes.

During the July meeting, Waller supported the FOMC’s decision to leave rates unchanged because the economy remained solid and recent data had offered early signs of disinflation. The committee held its target range at 3.50% to 3.75% by a 9–3 vote, while three officials preferred a quarter-point increase.

August inflation data will arrive days before the decision

The U.S. Bureau of Labor Statistics will release the August Producer Price Index on Sept. 10, followed by the Consumer Price Index on Sept. 11. Both reports will arrive less than a week before the Fed announces its decision on Sept. 16.

According to the BLS release calendar, the two reports are scheduled for 8:30 a.m. Eastern time. The short gap between the data and the meeting gives policymakers only a few days to assess whether price pressures continued to ease during August.

July’s Personal Consumption Expenditures price index, the Fed’s preferred inflation measure, rose 3.7% from a year earlier. The reading remained well above the central bank’s 2% target, while higher energy costs linked to the U.S.-Iran conflict have added uncertainty to the next set of figures.

Earlier rate expectations had climbed after Fed Chair Kevin Warsh used his Jackson Hole speech to warn that inflation had not returned to target. As crypto.news reported on Sept. 3, CME FedWatch had placed the chance of a quarter-point September increase above 66% before Waller outlined the conditions under which he could support a pause.

CME pricing later moved closer to 50% following his comments, according to Reuters. The difference between CME FedWatch and Polymarket comes from separate markets, pricing methods, and observation times, meaning their implied probabilities do not always match.

Other Fed officials remain open to higher rates

Waller’s conditional support for holding rates differs in tone from comments made by Governor Michael Barr earlier in the week, although both officials identified inflation as the main test for September.

In remarks delivered Sept. 1, Barr said inflation had remained too high for more than five years. Price growth dropped from above 7% in 2022 to slightly more than 2% in 2024, but progress stalled during 2025 as tariffs, the Middle East conflict and spending tied to artificial intelligence infrastructure added pressure.

Barr said officials could take more time to assess policy if incoming data gave him confidence that inflation was returning to 2%. If inflation failed to moderate enough, however, he said the central bank should “act decisively to raise rates.”

The July vote had already shown a split within the FOMC. Beth Hammack, Neel Kashkari and Lorie Logan opposed the decision to hold, preferring a 25-basis-point increase. Their dissents left the September outcome sensitive to even a modest surprise in the inflation data.

Energy remains one source of risk. Brent crude moved above $90 after renewed fighting near the Strait of Hormuz raised concerns about oil shipments, according to an Aug. 31 market report. Sustained increases in crude can feed into transport, production, and consumer costs, though the size and duration of any inflation effect depend on how long prices remain elevated.

Reports that President Donald Trump was considering declaring the U.S.-Iran war over later reduced some concern about another energy-price surge. Any verified end to hostilities could ease pressure on oil, but neither the White House nor the Fed has treated lower energy prices as assured.

Lower Fed rate hike odds support U.S. crypto markets

Polymarket’s September contract showed the probability of a rate hike falling to 38% after approaching 50% earlier in the week, while the chance of no change rose to roughly 62% to 63%. Because prediction-market prices move as users trade, the percentages may continue changing before the inflation releases.

A separate Polymarket contract placed the probability of at least one rate increase during 2026 at about 64%. Traders therefore continued to price a possible hike later in the year even as the expected chance of action in September declined.

For U.S. crypto investors, the rate decision can affect demand through Treasury yields, the dollar, and regulated investment products. Higher yields increase the returns available on government debt and money-market instruments, which can reduce demand for volatile assets that do not produce interest.

Recent U.S. spot Bitcoin ETF flows show why monetary policy remains relevant to the crypto market. An Aug. 31 ETF demand report found that the funds received about $3.04 billion across nine consecutive positive sessions from Aug. 17 through Aug. 27 before recording $201.9 million in net withdrawals on Aug. 28.