Traders Say 80% Chance of a December Hike. We Both Said Hold.

On Wednesday the Fed held rates where they are, at 3.75% to 4%. That came after Kevin Warsh raised them a quarter point in September. It wasn’t unanimous: two members dissented, and they didn’t want a cut. They wanted another hike.

Then Warsh said something at the press conference that matters more than the decision. He doesn’t believe in forward guidance outside of a crisis. For years the Fed told the market where rates were headed, months in advance. Warsh is saying: watch the economy, I’m not giving you any hints.

Bill Mei and I argued about what that means for the next six weeks on this week’s episode of The South Florida Mortgage Report.

“Wins on the board” doesn’t mean “we beat inflation”

When Warsh came in, he said he needed to put some wins on the board. A lot of people hear that and think he wants to stand up and say, “We beat inflation.”

I think that’s the last thing he would ever say. The minute a Fed chair says inflation is beaten, the market relaxes, money gets cheaper, people spend, and businesses raise prices again. He’s right back where he started. His most useful tool isn’t necessarily the rate. It’s everybody believing he’ll act the second inflation moves.

So the win he can put on the board is showing that his approach is working. Not that inflation is dead. That what they did is helping. Here’s what he said on Wednesday:

“Since our policy action in September, we started to see some changes in financial and credit conditions. They’ve tightened for some businesses and households, much as we would expect.”

What he’s pointing to is credit spreads.

Credit spreads, in plain English

The government is the safest borrower in the world, so whatever it pays is the floor. Right now that’s about 5% on the 10-year Treasury. Everybody else pays something extra, because they might not pay you back. That extra is the spread. Lending to the government versus lending to your brother-in-law: your brother-in-law pays a much bigger spread.

Here’s the part buyers don’t realize. Their mortgage rate is a spread. The 10-year is right around 5%. The average 30-year fixed in the Freddie Mac survey is around 7.25%, somewhere in the 7.25% to 7.5% range. The usual gap is about one and three-quarter points. When that gap widens, your rate goes up even if the 10-year sits still.

Why does Warsh care? He only controls one rate, the overnight rate. If lenders get nervous on their own and charge everybody more, they’re basically doing his job for him. Spreads have widened since September. So a quarter-point hike may have done more than a quarter point of work.

If the next six weeks of data cooperate, he could hold in December and say: we’re encouraged, we’re not satisfied, we’re ready to do more. That’s a win on the board without raising rates again.

The catch is that the market can’t decide he’s done, or spreads shrink, money eases and he’s back where he started. Which is why I think he would never say that he’s done.

Bill’s side: the bond market isn’t buying it yet

Bill liked the theory. He just didn’t think the scoreboard agreed with me yet.

There’s a number called the 10-year breakeven. It’s basically the bond market’s forecast for inflation over the next ten years, and it’s real money, not a survey. If Warsh’s credibility is working, that number should be drifting down. On Wednesday it closed at 2.38%, the highest since September 15th, the day before the hike. Whatever improvement there was after September, the bond market gave it back.

Then two of his own people voted for another hike, and traders put the odds of a December hike somewhere around 80%. The market thinks he talked tough and wants to see him act again. In Bill’s words, if credibility is the tool, the tool is being tested right now and it isn’t passing yet.

My pushback: inflation expectations going up in a month when gas jumped 9% isn’t crazy. September CPI was 3.7%, and gasoline was about half of that increase. The question is whether the oil shock spreads into everything else.

Bill’s answer, and it’s fair: core inflation, without food and energy, went from 2.4% to 2.6%, and that’s not just gas. I’ll give him that. Where we landed is that I’m not saying it’s working. I’m saying the next six weeks will decide whether it’s working.

What buyers are doing right now

Rates are in the 7.25% to 7.5% range. The Freddie Mac survey went 7.4%, then 7.32%, then 7.24%, two weeks in a row down. Bill is the one taking the calls, and he sees two kinds of buyers.

The ones who have to move, because of a job change, a family or a lease that’s up, are buying and have made peace with the rate. The ones who can wait are watching every headline. What he tells them: the headline you’re waiting for may not come. If it’s a hike in December, waiting cost you. If it’s a hold, rates might drift down a little. Nobody is promising anybody a 5% rate.

Lock or float with a December closing?

Between now and a December closing there’s a jobs report, CPI and PCE, and any one of them can move rates a quarter point in an afternoon. If somebody is under contract and the payment works, Bill would rather they lock and sleep at night than float and watch the news. And if rates drop after they lock? If they had a payment that worked and knew what it was, that’s the trade. He’s not going to tell somebody to gamble their closing on a CPI print.

Why December buyers do well

A lot of people think nobody buys in December, and that’s exactly why December buyers do well. There’s less competition, and sellers who listed in the fall and still haven’t sold don’t want to wait until the new year. That’s where you really negotiate: on price, or on a seller credit toward a buydown. A seller paying to buy the rate down can matter more than waiting six weeks to see what the Fed does.

We’ve both done it. I bought my current home in December, and Bill closed on December 31st. In my experience you also get buyers trying to close in December so they can qualify for the homestead exemption for the following year.

The dates that decide December

Warsh called the period in front of us “information rich.” Here’s what he’ll see before the meeting:

November CPI comes out December 10th, the day after the meeting. So one CPI report decides December, not two.

And the morning a hot CPI comes out? Don’t panic, and don’t wait for the comeback the next day either. Rates go up fast and come down slower.

The bigger story: learning how he decides

These six weeks aren’t just about December. Warsh isn’t giving guidance anymore, so this is the first stretch where the market has to figure out how he actually decides. Does one hot number move him, or does he wait for a trend? If the market learns he moves on trends, then next year a single bad number stops causing a massive swing in an afternoon. Volatility now, smoother later.

Bill took the other side of the timing. No guidance means every number has to do the talking, and holiday trading, with fewer people in the market, makes the moves bigger. He expects a choppy six weeks before anybody learns anything. We might both be right: choppy now, smoother later.

On the record: hike or hold on December 9th

We put our calls on the record so we can come back to them in December.

Oil was driving rates. Then tech stocks broke it.

In an earlier episode we said the price of oil was driving rates. That was true, right up until tech stocks started taking a beating. The market is worried that all the investment and borrowing going into AI may not pay off as much as everyone thought.

Normally oil going up, plus all that extra corporate borrowing, would push rates higher. Instead the worry about the economy has actually helped rates, in spite of oil. The oil-up, rates-up pattern broke down because of a new player in the game. None of this is simple, and that’s why we keep watching every factor.

What to do with this

For listing agents: buydown vs. price cut

An agent called Bill this week. They had a listing that wasn’t moving and asked for something on a buydown versus a price cut. Bill sent our report that night, and the agent loved it.

Here’s what the report does. Give it a ZIP code and it shows how many similar homes are for sale, how many active listings have already cut their price, and the median size of those cuts. Then it compares that price cut to what a 2-1 buydown would cost to market the property instead, and illustrates what it saves a buyer. It even includes remarks the agent can put in the MLS.

In the 33068 ZIP code, 79 single-family homes were on the market, and only one was advertising a rate buydown. Why wouldn’t you want your listing to be the one that stands out?

It’s marketing. Instead of doing what everybody else is doing, the more expensive option of just cutting the price, do what the builders do. Builders aren’t cutting their prices. They’re giving more and more incentives to attract buyers, and it works. Individual sellers can do the same thing.

We talk through this kind of thing every week on The South Florida Mortgage Report.

Capital Partners Mortgage Services, LLC · NMLS #2332376 · Craig Garcia, NMLS #653593 · 1515 N. University Dr., Suite D102, Coral Springs, FL 33071 · Equal Housing Opportunity · NMLS Consumer Access: www.nmlsconsumeraccess.org
Educational information only. Not a commitment to lend or an offer of credit, and not investment, tax or legal advice. Market rates, Treasury yields, inflation figures and Fed funds odds cited are as discussed on the episode recorded October 30, 2026, and change daily. Release dates are as scheduled at the time of recording. Predictions about Federal Reserve policy are the hosts’ opinions. Temporary buydown savings apply only during the buydown period and depend on loan terms; seller contributions are subject to program limits. All loans are subject to credit, income, property, appraisal and program approval.