$18.90K
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$18.90K
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15
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The FED rate is defined in this market by the upper bound of the target federal funds range. The decisions on the target federal fund range are made by the Federal Open Market Committee (FOMC) meetings. This market will resolve according to the upper bound of the Federal Reserve’s target federal funds range after the December 2026 Federal Open Market Committee (FOMC) meeting, currently scheduled for December 8-9, 2026. This market may resolve immediately after the statement for the FOMC’s Dece
Prediction markets are currently pricing in a low probability that the Federal Reserve's target rate will be at 3.25% or higher by the end of 2026. The leading contract on Polymarket, asking if the upper bound will be at least 3.25%, is trading at just 20%. This price implies the market sees only a 1-in-5 chance of rates remaining that elevated, suggesting a strong consensus that the Fed's cutting cycle will extend significantly over the next two and a half years. Across the suite of 15 related markets, the highest probabilities are concentrated in contracts for rate upper bounds between 2.00% and 2.75%.
The primary factor is the Federal Reserve's own "higher for longer" guidance shifting toward an easing bias as inflation cools. With core PCE inflation trending down toward the 2% target and the labor market showing gradual softening, markets are pricing in a full cutting cycle. The current effective federal funds rate above 5.25% makes a descent to 3.25% or below plausible within the timeframe. Second, historical analysis of past Fed cycles shows that once cutting begins, the process often continues through a period of economic recalibration, supporting the forecast for multiple consecutive rate reductions through 2025 and into 2026.
The most significant risk to the current low probability for a 3.25%+ rate is a resurgence of inflation, which would halt or reverse the expected cutting cycle. Upcoming FOMC meetings, economic data prints on employment and inflation, and revisions to the Fed's dot plot will be key catalysts. Specifically, if 2024 or 2025 growth proves more resilient than forecast, the Fed may pause cuts at a higher terminal rate. Conversely, a sharper-than-expected economic downturn could see probabilities shift even more dramatically toward lower rate outcomes, potentially pushing the 3.25% contract price into single digits.
AI-generated analysis based on market data. Not financial advice.
This prediction market topic focuses on forecasting the Federal Reserve's target federal funds rate at the end of 2026, specifically the upper bound of the range set by the Federal Open Market Committee (FOMC). The federal funds rate is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight. It serves as the primary tool for implementing U.S. monetary policy, influencing everything from mortgage rates and business loans to currency valuations and stock market performance. The resolution will be determined by the FOMC's decision following its December 8-9, 2026 meeting, making this a long-term forecast of monetary policy direction. The topic falls under the politics category because Federal Reserve decisions are deeply intertwined with economic policy, presidential administrations, and congressional oversight, despite the Fed's operational independence. Interest in this specific timeframe stems from its position beyond the typical 1-2 year forecast horizon used by most economists, requiring predictions about the economic cycle, inflation trajectory, and potential policy regime changes. Market participants are attempting to gauge whether the Fed will have completed a cutting cycle from current restrictive levels, embarked on a new hiking cycle, or settled into a neutral long-run policy stance by that distant date. The forecast involves assessing numerous variables including potential recessions, productivity trends, fiscal policy, and global economic conditions that could unfold over the next several years.
The federal funds rate has experienced dramatic shifts over decades, providing context for potential 2026 levels. Following the high inflation of the 1970s and early 1980s, then-Fed Chair Paul Volcker raised the rate to a peak of 20% in 1981 to break inflationary psychology. This established the Fed's credibility as an inflation fighter but also triggered a severe recession. The subsequent 'Great Moderation' period from the mid-1980s to 2007 saw generally declining rates, with the Fed under Alan Greenspan often acting to smooth economic cycles. The Global Financial Crisis of 2008 marked a paradigm shift. With the policy rate hitting the zero lower bound in December 2008, the Fed embarked on unprecedented quantitative easing (QE) and forward guidance. Rates remained near zero for seven years until the first post-crisis hike in December 2015. The hiking cycle was slow and shallow, with the rate reaching just 2.25-2.50% by December 2018 before the Fed had to cut again in 2019 amid growth fears. The COVID-19 pandemic forced a return to zero in March 2020, followed by massive QE. The post-pandemic inflation surge, beginning in 2021, prompted the most aggressive tightening cycle in 40 years, with the Fed raising rates from 0-0.25% in March 2022 to 5.25-5.50% by July 2023. This history shows that the Fed has operated in both high-rate and low-rate regimes, with the 'neutral' rate believed to have declined structurally over time due to demographic and productivity trends.
The federal funds rate at the end of 2026 will signal the Federal Reserve's assessment of the long-term equilibrium for the U.S. economy. A rate significantly above current projections would suggest the Fed believes the pre-pandemic era of low inflation and low rates is permanently over, possibly due to deglobalization, climate investment, or persistent fiscal deficits. This would mean higher borrowing costs for decades, affecting government debt servicing, corporate investment, and household mortgages. Conversely, a return to very low rates would indicate the Fed views the post-2021 inflation as a transitory anomaly, with secular stagnation forces reasserting themselves. This would have profound implications for pension funds, insurance companies, and savers struggling for yield. For the average person, the rate influences the cost of car loans, credit card interest, and adjustable-rate mortgages. It affects business decisions on expansion and hiring. For global finance, it determines the attractiveness of dollar-denominated assets and impacts exchange rates, with consequences for emerging markets that borrow in dollars. Politically, the rate in late 2026 will shape the economic environment for the 2028 presidential election cycle, influencing debates about economic management.
As of mid-2024, the Federal Reserve has paused its rate-hiking cycle after 11 increases since March 2022, holding the target range at 5.25-5.50%. Inflation has moderated from its 2022 peak but remains above the Fed's 2% target, particularly in services. The FOMC's most recent Summary of Economic Projections (March 2024) indicated a median expectation for three 0.25% rate cuts in 2024, but persistently strong economic data and sticky inflation have pushed back the timing of the first cut. Fed officials, including Chair Powell, have emphasized a data-dependent approach and stated they need greater confidence that inflation is moving sustainably toward 2% before beginning to ease policy. The debate has shifted from 'how high' to 'how long' rates will need to remain restrictive. Market expectations have swung dramatically, from pricing in six or more cuts in early 2024 to now expecting perhaps only one or two cuts beginning in late 2024 or early 2025.
The federal funds rate is an interbank overnight lending rate that serves as the baseline for all other interest rates in the economy. Banks use it as a reference point when setting their prime rate, which in turn influences rates for consumer loans like mortgages, auto loans, and credit cards. There is typically a spread of several percentage points between the fed funds rate and consumer borrowing rates.
Educational content is AI-generated and sourced from Wikipedia. It should not be considered financial advice.
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| Market | Platform | Price |
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| Poly | 21% |
| Poly | 18% |
| Poly | 14% |
| Poly | 8% |
| Poly | 7% |
| Poly | 5% |
| Poly | 4% |
| Poly | 3% |
| Poly | 3% |
| Poly | 2% |
| Poly | 2% |
| Poly | 2% |
| Poly | 2% |
| Poly | 2% |
| Poly | 2% |
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