July inflation came in almost exactly where economists expected, but traders still cannot agree on what the Federal Reserve will do in September. The gap is now clearest between traditional rates markets and prediction venues: CME FedWatch puts the probability of a 25-basis-point hike at about 44%, while Kalshi has it near 32% and Polymarket at roughly 33%.

That leaves a spread of around 12 percentage points on the same basic question less than five weeks before the September 16 decision. It is smaller than the divergence visible before the CPI release, but still large enough to show that futures traders and prediction-market participants are interpreting the Fed’s next move differently even after receiving another major piece of inflation data.

July CPI Cooled, but Not Enough to Kill the Hike

The Bureau of Labor Statistics reported that headline CPI rose 0.1% in July and 3.4% from a year earlier, easing from 3.5% in June. Core inflation increased 0.2% during the month and 2.5% year over year, down from 2.6%. Energy prices fell 1.5% during July, while shelter rose only 0.1%.

Those figures broadly matched expectations and were soft enough to reduce immediate pressure for another increase, but inflation remains above the Fed’s 2% target. CME pricing moved accordingly. The implied probability of a September hike fell to roughly 42% immediately after the release from around 46% beforehand, before recovering toward 44% as markets digested the report.

The reaction matters because FinanceFeeds’ CPI preview highlighted an unusually uncomfortable policy setup: inflation was still high enough to justify caution, while the labour market had suddenly become difficult to ignore.

The Jobs Report Changed the September Trade

The biggest repricing occurred five days before CPI. The July employment report showed nonfarm payrolls falling by 23,000, against expectations for an increase, while May and June payrolls were revised lower by a combined 103,000. The unemployment rate nevertheless slipped to 4.1%.

Before that release, traders had been leaning much more heavily toward another increase. September hike probabilities had climbed above 60% on some venues following the Fed’s July meeting, when policymakers voted 9-3 to keep the target range at 3.50% to 3.75% and three officials dissented in favour of a hike. The jobs miss forced traders to weigh persistent inflation against evidence that employment was deteriorating.

That tension is still visible after CPI. Inflation did not reaccelerate enough to overwhelm the weak labour data, but neither did it fall far enough to eliminate another increase from consideration.

Why CME, Kalshi and Polymarket Do Not Agree

The differences between the three markets are not necessarily evidence that one is mispriced. They are structurally different products populated by different participants.

CME FedWatch derives probabilities from 30-Day Federal Funds futures, instruments heavily used by banks, hedge funds and professional rates traders to hedge and express views on monetary policy. CME describes FedWatch as a translation of futures prices into probabilities for different FOMC target-rate outcomes.

Kalshi and Polymarket instead offer event contracts that pay according to specified outcomes. Kalshi’s September market currently assigns about 65% to no change, 32% to a 25-basis-point hike and only around 2% to a 25-basis-point cut. Polymarket is remarkably close, pricing no change near 66% and a 25-basis-point increase around 33%.

The convergence between those two prediction venues after CPI is notable. The remaining disagreement is primarily between prediction markets and Fed Funds futures rather than between Kalshi and Polymarket themselves.

September Is Still a Live Risk for FX and CFD Desks

For FX and CFD brokers, a 32% to 44% probability is far from negligible. A September hike would run against the positioning of traders expecting the July jobs report to push the Fed toward an extended pause, potentially producing a rapid repricing across the dollar, Treasury yields, gold and U.S. equity indices.

The opposite risk remains important as well. If upcoming data reinforce the labour-market weakness while inflation continues easing, the remaining hike premium could unwind further, putting pressure on the dollar and real yields while supporting rate-sensitive assets.

The next major inflation reading before the September meeting is the August CPI report on September 11, only five days before the FOMC decision. That makes the current disagreement unusually vulnerable to another sharp repricing.

July CPI therefore did not provide the clean answer traders were looking for. It narrowed the debate, but it did not resolve it. CME still sees something close to a two-in-five chance of a hike, while Kalshi and Polymarket are closer to one-in-three. For desks trading the September decision, that difference is now part of the trade.