Claudia Sahm Urges October Fed Hike as Odds Fall to 17% From as High as 70%

Former Federal Reserve economist Claudia Sahm is urging a 25-basis-point October rate hike, arguing early action could curb the need for larger increases if inflation stays elevated or rises further.

Market-implied odds of an October increase stood at 17% on Oct. 21, after reaching as high as 70% about three weeks earlier. Investors increasingly expect the Fed to hold rates steady, continuing a shift in October rate-hike bets.

The personal consumption expenditures price index rose 3.4% in August from a year earlier. The Fed’s inflation target is 2%. Sahm has questioned what would show inflation is on track to return to that level without another increase.

Sahm views a quarter-point hike as a safeguard against waiting until inflation remains elevated or rises further and policymakers have to tighten more forcefully. Her argument centers on the potential cost of delaying action, even as market expectations have moved toward a pause.