Fed Watch — the October 28, 2026 FOMC decision: Fed maintains rate priced at 87%, Taylor rule 4.51%

Markets disagree by 0.0 points: Kalshi prices Fed maintains rate at 86.5%, Polymarket at 86.5%. Polymarket (Fed Decision in October?, $45M traded): No change 86.5%, 25 bps increase 13.5%, 25 bps decrease 0.4%, 50+ bps increase 0.4%. Fed funds futures are not on the tape: CME futures data has no keyless primary source. Both markets shown are real-money prediction markets already in the data directory.

10 days to the decision (statement 2:00 PM ET). Kalshi prediction-market odds as of October 18, 2026: Fed maintains rate 86.5%, Hike 25bps 13.5% — a probability-weighted move of +3bp. The effective fed funds rate is 3.88% (2026-10-15), a 3.75–4% target range inferred from EFFR.

The Taylor rule today

i = r* + π + 0.5(π − 2) + 0.5·gap, gap = okun·(NAIRU − u) with r* 1%, NAIRU 4.2%, Okun 2: core PCE 3.01% (August 2026) and unemployment 4.2% (September 2026) prescribe 4.51%, +63bp versus the actual rate. The inertial rule the Fed follows in practice (i_t = 0.85·EFFR_(t−1) + 0.15·i_Taylor,t) prescribes 3.97% (+9bp); with the Nowflation core-PCE nowcast of 3.04% for September 2026 the plain rule reads 4.56%. Monthly history since 2017-01; r* and NAIRU are adjustable on the page.

What the Fed sees

Core PCE (the trend measure the Fed watches most closely; its 2% objective is on headline PCE): 3.01% (August 2026), +1.01pp vs 2%; Nowflation nowcast for September 2026: 3.04%
Headline PCE 3.42% · trimmed-mean PCE 2.19% · core CPI 2.6% · headline CPI 3.7% (September 2026) — Nowflation Forecast 3.86% headline, 2.76% core for October 2026 (in-house model alone 3.97% headline) · Atlanta Fed core sticky CPI 2.78% (September 2026)
Expectations: 5-year breakeven 2.37%, 5y5y forward 2.33%, Cleveland Fed 1-year 2.98%, Michigan 1-year 4%
Labor: unemployment 4.2% (September 2026) vs an assumed 4.2% NAIRU, Sahm rule 0.00, payrolls +51k/month over three months, Nowflation payroll nowcast +102k for October 2026, initial claims 198.5k (4-week average)
Curve (2026-10-15): 2-year 4.77%, 10-year 5.1%, 10y−2y +0.33pp, 10y−3m +0.82pp, 10-year TIPS real yield 2.78%, 5-year breakeven 2.33%

Taylor (1993) rule with an Okun’s-law output gap, computed monthly on core PCE YoY (PCEPILFE), the unemployment rate (UNRATE) and the monthly average effective fed funds rate (EFFR); the inertial variant lags the prior month’s actual EFFR at 0.85, the Federal Reserve’s Monetary Policy Report convention. Market-implied change = Σ probability × move, with “>25bp” outcomes priced at 50bp. Year-over-year rates are computed from index levels; CPI on NSA indexes (BLS convention). Curve series are the last observation of each week. Sources: FRED / Federal Reserve Board, BEA, BLS, the Dallas, Atlanta and Cleveland Feds, Kalshi public market data (display only), Taylor (1993). Odds history is logged daily from 2026-09-01.