Rate hike odds 22 is the reading now attached to the Federal Reserve’s chances of raising rates at the October 27 and 28 meeting, as measured on Monday morning, according to the CME FedWatch tool cited by Reuters, down from 64% a week earlier. This drop in rate hike odds follows the October 2 release of a US jobs report that came in well below expectations: 29,000 nonfarm payrolls added in September against a consensus of 90,000, and an unemployment rate that rose to 4.2%.
The Department of Labor report, relayed by Reuters, shows that September job creation slowed sharply from the previous month. The article states that “Nonfarm payrolls increased by 29,000 jobs last month after a downwardly revised rise of 133,000 in August.” The unemployment rate, meanwhile, rose from 4.1% in August to 4.2% in September, “as more people entered the workforce,” according to the same source. You can find more detail on this report in our daily briefing on the September US jobs report. These rate hike odds of 22% compare to figures the same wire service had first cited earlier in the session.
A sharp pullback in rate hike expectations
This weakness in the labor market immediately changed how investors read the upcoming monetary policy meeting. According to Reuters, “Investors are now pricing in just a 22% chance that the Fed could raise rates this month, as compared to a 64% chance a week ago, according to the CME FedWatch tool.”
The 10-year US Treasury yield stood at 5.2643% Monday morning, against 4.8143% for the 2-year, according to Reuters. This move in longer-dated yields accompanies the pullback in short-term monetary tightening expectations.
| Indicator | Value | Date or moment |
|---|---|---|
| October rate hike odds (CME FedWatch) | 22% | October 5, 2026, morning |
| Rate hike odds a week earlier | 64% | around September 28, 2026 |
| 10-year US Treasury yield | 5.2643% | October 5, 2026, morning |
| 2-year US Treasury yield | 4.8143% | October 5, 2026, morning |
| Nonfarm payrolls, September | 29,000 | published October 2, 2026 |
| US unemployment rate, September | 4.2% | published October 2, 2026 |
The Nikkei crosses the 70,000-point threshold
In Asia, this more accommodative reading of US monetary policy spread to equity markets. According to Nikkei Asia, “the benchmark Nikkei Stock Average crossing the 70,000 threshold during intraday trading for the first time in three months.” This threshold crossing, hailed by the Japanese financial press as a return of optimism tied to artificial intelligence, comes the same Monday morning that US rate expectations eased.
In commodity markets, oil slipped slightly on Monday. According to The Economic Times, “Brent crude futures fell 70 cents, or 0.69%, to $101.60 a barrel, while US West Texas Intermediate crude was at $90.15 a barrel, down 90 cents, or 1.07%.” This decline comes despite persistent tensions in the Middle East, with the article citing tensions linked to the war in Iran as a risk factor for supply, without this preventing the pullback in prices that day.
This week’s economic calendar
Two releases frame the week for US markets. The ISM services index for September is due to be published this Monday, October 5, at 10:00 a.m. New York time, according to the economic calendar consulted. The minutes of the September 15-16 FOMC meeting are due to be published on October 7 at 2:00 p.m. Washington time, according to the Federal Reserve’s official calendar. Neither release had occurred yet at the time this briefing was written, so their content cannot be anticipated.
For traders following this kind of sequence between employment data, rate expectations, and equity market reaction, it may help to review how a trailing stop order works during periods of heightened volatility, or to understand the mechanics of the bid-ask spread on CFDs and Forex when volumes intensify around a macro release. Details on the previous week, when the 10-year yield stood near 5.28%, appear in our review of September 28 to October 4.
Frequently asked questions
Why did rate hike odds fall after the jobs report?
The October 2 report showed a sharp slowdown in job creation, with 29,000 positions added in September against a consensus of 90,000, and an unemployment rate that rose to 4.2%. A weaker-than-expected labor market generally reduces, in investors’ eyes, the probability that the central bank will tighten policy, which explains the pullback in rate hike odds to 22% as measured by the CME FedWatch tool.
What is the CME FedWatch tool?
It is a tool that translates interest rate futures prices into implied probabilities of Federal Reserve decisions at upcoming meetings. Reuters relies on this tool to show that the probability of a rate hike at the October 27-28 meeting fell from 64% to 22% in one week, with rate hike odds shifting over the course of the morning as the wire service issued successive updates.
Why did the Nikkei cross 70,000 points this Monday?
According to Nikkei Asia, the index crossed this threshold intraday for the first time in three months, amid a return of optimism tied to artificial intelligence. This move came the same day markets revised down their expectations for US monetary tightening, a factor that also supported equity markets elsewhere in the world.
What should be watched this week?
Two releases are expected: the ISM services index for September, due this Monday, October 5, at 10:00 a.m. New York time, and the minutes of the September 15-16 FOMC meeting, due October 7 at 2:00 p.m. Washington time. Both releases may provide further insight into the trajectory of US monetary policy, though their content cannot be anticipated before publication.