Market participants are pricing in a 53% to 60% chance that the Federal Reserve will raise interest rates during its meeting on October 28. The U.S. 10 year Treasury yield returned to 5%, and the 2 year yield climbed above 4.74%, the highest level for that maturity since July 2024. These yield levels increase borrowing costs for residential mortgages and corporate debt financing across the economy.

The current market outlook differs from 2025 projections that anticipated three interest rate cuts by October 2026. A hike next month would place interest rates 125 basis points higher than those original expectations. The probability of action on October 28 continues to rise regardless of the date's proximity to the midterm elections.