There is now an 83% to 90% chance the Federal Reserve raises interest rates by a quarter point at its Sept. 16 meeting, according to CME Group's FedWatch tool and the prediction market Kalshi. FedWatch puts the likelihood above 90%, while Kalshi gives an 83% probability that the federal funds rate will be above 3.75% after the September meeting. Goldman Sachs market strategist Ben Snider and his team noted that at the start of seven hiking cycles over the past 20 years, the S&P 500 returned -2% on average over the next three months, and a Charles Schwab note shows the index averaged a six-month drawdown of 12.2% and an average one-year decline of 14% between 1946 and 2022. The severity depends on the pace of tightening, with rapid cycles producing the worst sell-offs and non-cycles the mildest. Fed Chair Kevin Warsh has been less willing to provide forward guidance, and FedWatch currently prices in four rate hikes through the end of 2027, including a September move.
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