Changes in the Federal Reserve’s benchmark interest rate can move markets.
A good example was on August 28, 2026 when Fed Chair Kevin Warsh delivered his Jackson Hole symposium address.
His remarks were widely interpreted as hawkish, and the market sold off a bit in response.
So what are the chances of a rate hike in the next FOMC meeting on September 16th, 2026?
“Note: The specific probabilities in this article reflect market conditions as of August 31, 2026.
For current Fed rate odds, visit the CME FedWatch Tool directly.”
Contents
- FedWatch Tool
- The Odds Changes
- What Fed Rate Hike Odds Mean For Options Traders
- Frequently Asked Questions
- Conclusion
FedWatch Tool
The best way to find this answer is to use the FedWatch Tool by the CME Group.
Source: CME FedWatch Tool
After the Warsh address as of August 29th, the odds of a quarter-point (25 basis point) hike in September is at 57%.
There remains a 43% chance the Fed holds rates steady.
The tool backs out the market’s implied odds from pricing in Fed funds futures contracts, updating continuously as those contracts trade throughout the day.
The Odds Changes
What makes the tool interesting is watching how fast those odds change.
The blue highlighted row shows that the probability of a rate hike a month ago was 57%.
Only one week ago, that chance dropped to 40%.
And now it came back up to 57% again.
Or you can see this in bar chart form…
In the below graphic, you can see the probabilities as a moving target as the days till the next FOMC draws closer and closer…
Here we see that we are 19 days to the next FOMC meeting in September 2026.
And the probability of a rate hike is at 57%.
What Fed Rate Hike Odds Mean For Options Traders
Interest rate decisions are significant market-moving events — and for options traders, the FedWatch Tool provides two specific types of actionable intelligence.
Implied volatility typically rises before FOMC meetings.
As the meeting date approaches and uncertainty is elevated, implied volatility in the broader market tends to increase — particularly when the odds are close to 50/50 as they are right now.
This can make selling premium before an FOMC meeting attractive in theory, but it also means that IV can collapse sharply after the announcement regardless of the actual outcome (the classic “IV crush“).
Options traders who sell premium ahead of FOMC meetings should be aware that their short premium is exposed to this directional uncertainty.
The direction of probability change signals sentiment shifts.
The most useful signal from the FedWatch Tool isn’t the absolute probability — it’s the direction it’s moving.
The example above shows probabilities swinging from 57% to 40% and back to 57% within a single month.
Each of those shifts represents a change in market expectations that moves the stock market, the bond market, and volatility levels simultaneously.
Watching the FedWatch odds move over the days leading up to an FOMC meeting is a useful real-time gauge of whether markets are becoming more or less hawkish — which in turn affects whether you want to be adding or reducing short premium exposure.
Iron condor traders specifically should note that a 57/43 probability split on a Fed decision is close to maximum uncertainty — the market is nearly evenly split, which typically means elevated implied volatility and a higher risk of a sharp move in either direction at the announcement.
Running a standard-width iron condor into an FOMC meeting with this level of uncertainty carries meaningful gap risk.
A practical approach is to close iron condor positions before the FOMC announcement and re-enter after the decision has been absorbed.
Frequently Asked Questions
What Does Hawkish And Dovish Mean?
Hawkish means favoring tighter policy with higher rates to fight inflation, even if that risks slowing the economy or the job market.
Whereas dovish means favoring looser policy by holding or cutting rates to support growth and employment, even if that means tolerating somewhat higher inflation.
What is Bps?
“Bps” stands for basis points.
It’s a unit used in finance to measure small percentage changes, especially in interest rates.
1 basis point = 0.01%
So 25 bps is equivalent to 0.25%.
This value is also referred to as quarter point, which is the typical increment of a rate increase.
When you see that the current rate is at 350 bps.
It means the interest rate is at 3.50%.
How Often Do FOMC Meetings Occur?
Eight scheduled meetings per year, roughly every six to eight weeks – less frequent than once a month.
You can actually see the next several upcoming meetings across the top of the tool here…
Clicking on the Oct 28th, 2026 meeting, we can see the probabilities of what the rate announcement would be for that meeting.
But that might be too far away to assess accurately.
Conclusion
It’s a useful reminder that these probabilities are a snapshot of current market sentiment, not a prediction of what will actually happen, and they can move again well before the actual meeting date.
With the CME FedWatch Tool, you can track the market’s real-time odds of a rate hike just as easily as any professional – just keep in mind that the numbers you see today may look very different by the time the Fed actually meets.
Want to Trade Options Around Market Events With a Systematic Approach?
Managing options positions around FOMC meetings, earnings, and other market-moving events is a key part of systematic income trading.
Options Income Mastery covers exactly when to reduce exposure before known risk events and how to re-enter after the market absorbs the news.
Learn more about Options Income Mastery →
We hope you enjoyed this article on the chances of a Fed rate hike.
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Trade safe!
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
