Key Highlights

  • Traders price about an 81% to 85% chance of a Fed hike in December 2026, up from 73% earlier this week and 42% a month ago, according to CME FedWatch as cited and recaps.
  • Chair Kevin Warsh gave no forward guidance on October 28, 2026, but called labor market conditions quite positive and energy prices an inflation risk while saying he does not intend to cause job losses.
  • The recaps disagree on the exact odds, with 81%, about 83% and about 85% quoted, so this article uses above 80% until a live CME figure is checked for iShares 1-3 Year Treasury Bond ETF (NASDAQ:SHY).
  • September PCE inflation lands at 7:30 a.m. ET on October 29, 2026 and the midterms follow on November 3, two events SHY (NASDAQ:SHY) investors will watch before the December 8 to 9 meeting.

How Hike Odds Jumped

Fed funds futures moved sharply after the October 28, 2026 meeting. CME FedWatch, as cited in recaps, showed about 81% odds of a December hike, while other recaps put the figure near 83% or 85%. The probability stood at 73% earlier in the week and 42% a month ago, so the repricing is large. The Federal Open Market Committee held at 3.75% to 4.00% in a 10 to 2 vote, with Governor Lisa Cook and Cleveland Fed President Beth Hammack voting for an increase. Warsh gave no forward guidance, which left traders to extrapolate from the dissents and the stronger statement language. The shift came in under a month.

Why the Short End Is Sensitive

Short-term Treasuries react most directly to the expected policy rate. iShares 1-3 Year Treasury Bond ETF (NASDAQ:SHY) holds notes maturing within one to three years, so a higher expected path for the policy rate lowers the value of existing securities, although the small duration limits the effect compared with long bonds. Warsh said labor conditions are quite positive and called energy prices an inflation risk, but added that he does not intend to cause job losses. That mix leaves room for a hike if inflation data disappoint. No price move for SHY (NASDAQ:SHY) is cited because none was verified. Duration measures how much a bond price reacts to yields.

Risks and What to Watch

The Fed also needs September PCE, out at 7:30 a.m. ET on October 29, 2026, and the November 3 midterms behind it before it acts. Third-quarter GDP and jobless claims arrive at the same time, though consensus tables for those releases are unreliable. A seven-year Treasury auction at 12:00 p.m. ET tests demand, with the prior high yield at 5.085%. The next Fed meeting is December 8 to 9, with projections. Market odds can swing within days, as the move from 42% to above 80% shows, so any reading for SHY (NASDAQ:SHY) is a snapshot rather than a prediction. A hot reading would push the odds higher still.

Where Things Stand

Fed hike odds are above 80% because the committee held with two hawkish dissents, the statement described a strong economy, and Warsh gave no guidance to cool expectations. For iShares 1-3 Year Treasury Bond ETF (NASDAQ:SHY), that matters because short maturities track the policy path closely. The next tests are PCE at 7:30 a.m. ET on October 29, 2026 and the December 8 to 9 meeting, and the odds could still move sharply either way.