Short Answer

Both the model and the market expect the Fed to do a rate cut greater than 25bps in 2026, with no compelling evidence of mispricing.

1. Executive Verdict

  • Weak Q2 and Q3 2026 jobs/inflation data may trigger larger cuts.
  • Hawkish FOMC members in 2026 expressed low appetite for large cuts.
  • Fed's 2026 forecasts suggest higher inflation and unemployment than banks.
  • Geopolitical or energy market shocks could alter the Fed's forecast.
  • Recent market pricing indicated effectively zero for significant rate cuts.

Who Wins and Why

Outcome Market Model Why
In 2026 14.5% 9.5% The market projects a rate cut greater than 25bps may occur in 2026.

Current Context

The Federal Reserve is maintaining a stable federal funds rate target range, currently set at 3.50%-3.75% after the March 18 and April 29, 2026, FOMC meetings [^] [^] [^] [^] [^] [^] [^] . This stability follows a series of rate cuts initiated in late 2025 [^][^]. The FOMC has several remaining meetings scheduled for the year, including June 16–17, July 28–29, September 15–16, October 27–28, and December 8–9 [^][^][^][^][^]. The Fed's cautious stance is largely influenced by elevated inflation, partly due to increased global energy prices and geopolitical developments, which poses challenges to its 2% inflation target [^][^][^][^][^][^][^]. Additionally, a resilient job market, with steady job gains and an largely unchanged unemployment rate, further reduces the urgency for rate adjustments [^][^][^].
Experts and dissenters doubt significant 2026 rate cuts, with earlier forecasts shifting to a more conservative outlook. While Goldman Sachs Research in December 2025 had anticipated a pause in January 2026 before delivering cuts in March and June [^], more recent analysis from J.P. Morgan Global Research expects the Fed to hold rates steady for the remainder of 2026, with a potential 25 basis point hike in Q3 2027 [^]. Fidelity analysts similarly note that "hotter inflation plus a stabilizing job market have dimmed the prospect of rate cuts in 2026" [^]. A financial analyst at Bankrate suggested in April 2026 that both rate cuts and hikes are "probably off the table for all of 2026" [^]. This sentiment is echoed by dissenting voices within the Fed, as four FOMC members at the April 29, 2026, meeting preferred more flexible language regarding future rate cuts or even hinted at the possibility of a rate hike if inflation persists [^][^].
Prediction markets overwhelmingly signal no substantial 2026 rate reductions, and a cut greater than 25 basis points appears highly improbable. As of April 2026, Polymarket bettors assigned a 43% chance of no Fed rate cuts in 2026, with the probability for one cut at 26% and for two cuts at 16%; anything beyond four cuts was considered highly unlikely [^]. The market is currently pricing in zero rate movements for 2026, with the first 25 basis point cut anticipated in December 2027 [^]. The CME FedWatch Tool in February 2026 indicated an 82-86% probability of unchanged rates at the March 2026 meeting, with only a 13-18% chance of a 25 basis point cut [^]. More recent data from early May 2026 showed a low 3.3% probability of a rate cut by June 2026 [^]. Furthermore, there is a rising sentiment for potential rate hikes, with some odds reaching 10% after Fed Chair Powell's April press conference, and the Kalshi prediction market estimating a 44% chance of a Fed rate hike before July 2027 [^][^]. A "Pause-Pause-Pause" scenario for the June, July, and September 2026 FOMC meetings has a 56.5% implied probability in prediction markets, while any sequence with at least one rate reduction before September 16 has a 43.5% probability [^]. A rate cut "greater than 25bps" refers to a single cut exceeding this amount, not multiple 25 bps cuts [^].

2. Market Behavior & Price Dynamics

Historical Price (Probability)

Outcome probability
Date
This prediction market has exhibited a sideways trend, with the probability of a large Fed rate cut trading within a defined range of 11.0% and 21.8%. The market opened with a 17.0% probability and has since drifted down to its current price of 14.5%. The most notable recent movement is the price decline from 17.0% to 14.5% between late April and early May. This shift coincides with the period encompassing the April 29 FOMC meeting, where the Federal Reserve announced it was maintaining its stable federal funds rate. This action appears to have tempered expectations for an aggressive cut, contributing to the modest decline in the market's probability.
The market has seen a total volume of 36,221 contracts, indicating a fair amount of historical interest. However, the most recent sample data points show zero volume, which could suggest that trader conviction is low following the recent Fed decisions, with market participants potentially adopting a wait-and-see approach for new economic signals. The price range itself has established a support level near 11.0% and a resistance level around 21.8%. The market has consistently failed to break above this upper bound, suggesting significant seller interest at that level.
Overall, the price chart reflects a market sentiment that views a rate cut greater than 25bps as a low-probability event. The stable, range-bound price action is consistent with the current context of the Fed holding rates steady. The market appears to be pricing in the Federal Reserve's stated policy stance, showing sustained skepticism that a significant policy shift toward aggressive easing will occur this year.

3. Market Data

View on Kalshi →

Contract Snapshot

The market resolves to YES if the Federal Reserve executes a single rate cut of more than 25 basis points (e.g., 50bps or more) before December 31, 2026. If no such rate cut occurs by this date, the market resolves to NO. The outcome is verified from the Federal Reserve, and the market closes early if the event occurs, otherwise by January 1, 2027, at 10:00am EST.

Available Contracts

Market options and current pricing

Outcome bucket Yes (price) No (price) Last trade probability
In 2026 $0.15 $0.85 14%

Market Discussion

Traders overwhelmingly anticipate the Federal Reserve will not implement a single rate cut greater than 25 basis points this year. Much of the discussion focuses on clarifying the market's specific rule that requires a single cut larger than 25bps, not cumulative cuts, which some participants initially misunderstood. The main argument for "Yes" is based on speculative political pressure from a potential future administration demanding an immediate, large rate cut.

4. What specific economic indicators in the Q2 and Q3 2026 jobs and inflation reports would need to materialize for the FOMC to consider a rate cut greater than 25bps?

FOMC Rate Cut BasisIncoming data and balance of risks (labor market, inflation) [^][^]
Key Labor Market IndicatorsSlower nonfarm payroll growth, rising unemployment, decelerating wage growth [^][^][^][^]
Key Inflation IndicatorsCore disinflation toward 2%, stable/lower inflation expectations, no substantially higher oil prices [^][^][^]
The Federal Open Market Committee (FOMC) would consider rate cuts greater than 25 basis points in Q2 and Q3 2026 by focusing on incoming data and the overall balance of risks, particularly concerning labor-market conditions and inflation pressures and expectations, rather than adhering to a fixed numeric rule [^] [^] . The Committee's March 2026 minutes indicated that a "further softening in labor market conditions" could justify additional rate reductions. Conversely, the FOMC also warned that "substantially higher oil prices" could exacerbate inflationary pressures, potentially complicating such decisions [^].
Softening labor conditions require specific employment and wage indicators. Specific labor-market indicators signaling a "further softening" would include a deceleration in nonfarm payroll job growth, an increase in the unemployment rate, and a slowdown in wage growth [^][^][^][^]. These concrete readings would imply downside employment risk, strengthening the case for additional rate cuts.
Disinflationary trends and stable oil prices support further rate cuts. Regarding inflation reports in Q2 and Q3, relevant indicators would include sustained core disinflation trending towards the 2% target, coupled with clear evidence that "inflation expectations" are stabilizing or declining [^][^][^]. These factors would reflect an easing of broader "inflation pressures." Furthermore, the absence of a substantial increase in oil prices, given the FOMC's concern about oil-price-driven inflation risk, would be an important consideration for initiating further rate cuts [^].

5. What do the 2026 public statements from hawkish FOMC members, such as Neel Kashkari and Lorie Logan, indicate about the committee's appetite for a significant rate cut?

Stance on Rate CutsLow appetite for significant cuts (>25 bps) among hawkish FOMC members [^]
Date of Hawkish RemarksMay 1-3, 2026 (Logan and Kashkari) [^]
Market Expectation for EasingNot expected until at least September [^]
Hawkish Federal Open Market Committee (FOMC) members in 2026 expressed a low appetite for significant rate cuts. Neel Kashkari indicated discomfort with signaling a rate cut, citing uncertainty from Middle East-driven inflation and even suggesting a potential need to raise rates [^]. Similarly, Lorie Logan dissented from FOMC statements implying an easing bias, emphasizing "two-sided risks" where the next rate move could be either an increase or a cut [^].
This collective opposition signals reduced likelihood of substantial near-term rate cuts. Remarks by Logan and Kashkari, made between May 1-3, 2026, were part of a broader trend of hawkish dissents against an easing bias, also involving other regional presidents like Beth Hammack [^][^][^]. This unified stance is interpreted as reducing the near-term probability of a substantial rate cut exceeding 25 basis points [^]. This perspective aligns with current market expectations, where significant easing is generally not anticipated until at least September, making large early cuts improbable [^].

6. How do the Federal Reserve's own 2026 economic forecasts in its Summary of Economic Projections (SEP) differ from the outlooks published by major banks like J.P. Morgan and Goldman Sachs?

Real GDP Growth (Goldman Sachs 2026)2.8% [^]
Core PCE Inflation (Goldman Sachs 2026)2.2% [^][^]
Fed Rate Cuts (Fed's SEP 2026)One additional cut [^]
The Federal Reserve's 2026 economic outlook differs from major bank forecasts. The Federal Reserve's March Summary of Economic Projections (SEP) indicates a median forecast of 2.4% for real GDP growth in 2026 [^][^][^]. This projection is notably more conservative than Goldman Sachs Research's forecast of 2.8% [^]. Conversely, J.P. Morgan anticipates slightly slower growth, expecting real GDP to be around 2.2% [^] for the same period.
Inflation and monetary policy expectations vary significantly among forecasters. Goldman Sachs projects core PCE inflation to decline to 2.2% by year-end 2026 [^][^], which is lower than the Federal Reserve's median projection of 2.7% for overall PCE inflation [^][^][^][^]. In contrast, J.P. Morgan foresees "elevated" and "sticky" inflation [^][^]. Regarding monetary policy, Goldman Sachs anticipates 50 basis points of Fed rate cuts in 2026 [^], aligning with J.P. Morgan's forecast of two rate cuts [^]. This contrasts with the Fed's own SEP, which suggests a median expectation of only one additional rate cut for 2026 [^].
Unemployment rate forecasts show slight differences or general concerns. The Federal Reserve's median forecast for the unemployment rate in 2026 is 4.4% [^][^][^][^][^]. J.P. Morgan's projection is close to this, expecting the rate to hold steady at approximately 4.5% [^]. Goldman Sachs, while not providing a specific numerical forecast, has indicated potential "labor market weakness" [^][^] for the period.

7. What are the key dates for the remaining 2026 FOMC meetings and the scheduled releases of the critical CPI and PCE inflation reports?

Federal Funds Rate Target3.50%–3.75% (March 17–18, 2026 FOMC meeting) [^]
Next CPI Report ReleaseMay 12, 2026 (April 2026 data) [^][^][^]
Next PCE Report ReleaseMay 28, 2026 [^][^]
Specific 2026 FOMC meeting dates are not available in the provided research. While sources confirm that the remaining dates for 2026 FOMC meetings are established [^][^][^][^][^], the specific schedule was not detailed in the information provided. As of the March 17–18, 2026 FOMC meeting, the federal funds rate target range was 3.50%–3.75% [^]. The timing and magnitude of any potential rate adjustments by the Federal Reserve are dependent on evolving economic conditions, particularly inflation and growth data [^].
Critical CPI and PCE inflation reports are scheduled for release in 2026. Key upcoming inflation report dates include the Consumer Price Index (CPI) release on May 12, 2026, which will present data for April 2026 [^][^][^]. Other anticipated CPI releases for 2026 are August 12, September 11, October 14, November 10, and December 11 [^]. Additionally, the Personal Consumption Expenditures (PCE) inflation report is scheduled for May 28, 2026 [^][^].

8. What potential geopolitical or energy market shocks in the second half of 2026 could significantly alter the Fed's inflation forecast and force a more aggressive policy response?

Oil price spike scenario$150/bbl [^]
Q4 2026 Headline PCE increase (Strait-of-Hormuz closure)0.79 to 1.46 percentage points [^]
OPEC+ output adjustment (June 2026)188k bpd [^]
Geopolitical tensions, particularly in the Middle East, pose significant inflation risks. Potential geopolitical and energy market shocks in the second half of 2026, primarily stemming from persistent Middle East/Iran conflict and associated oil-market volatility, could significantly alter the Federal Reserve's inflation forecast and necessitate a more aggressive policy response [^]. Such disruptions challenge the baseline assumption that energy market issues largely dissipate later in the year, potentially leading to higher inflation [^].
Extreme oil price spikes could significantly increase U.S. inflation. A downside risk scenario projects oil prices spiking to $150 per barrel, which could cause inflation to rise in late 2026 if an energy price recession fails to materialize [^]. This scenario anticipates U.S. headline Personal Consumption Expenditures (PCE) to be higher in Q4 2026 compared to the previous year [^]. For instance, a Strait-of-Hormuz closure lasting two to three quarters is estimated to raise Q4/Q4 headline PCE inflation in 2026 by approximately 0.79 to 1.46 percentage points, with potential for larger effects on core PCE if the closure is prolonged [^].
Ongoing supply constraints could keep inflation elevated, affecting monetary policy. While OPEC+ planned a June 2026 output adjustment of 188,000 barrels per day, oil exports from the Middle East remain largely constrained due to the Iran conflict, suggesting any supply relief might be partial [^]. If these energy-market disruptions persist longer, inflation could remain above the 2% target, pushing markets towards maintaining current interest rates for the remainder of 2026 instead of implementing cuts, as energy-driven inflation risks have already led to a repricing of rate expectations [^].

9. What Could Change the Odds

Key Catalysts

Market indicators suggest a low probability of significant rate cuts in the near term. Polymarket-linked reporting around the April 28–29, 2026 window indicated a near-zero probability (~0.0025) for a 50+ bps cut after that meeting, implying very low odds for an >25 bps step around that period absent a major downside shock [^]. A market-based read of CME FedWatch-related June 16–17, 2026 pricing showed approximately 36% probability for a 25 bps cut and effectively zero probability for any cut larger than 25 bps as of April 22, 2026 [^].
The Federal Open Market Committee (FOMC) holds eight regularly scheduled meetings each year, with the Fed’s official calendar listing 2026 meeting dates and links to policy statements/minutes, which market resolution criteria typically reference [^] . Critical datapoints for whether a June cut happens and how large it could be were explicitly cited as April CPI (May 13), April jobs (May 2), and May CPI (June 11—6 days before the June 17 decision) [^]. J.P. Morgan’s base case calls for holding rates steady for the rest of 2026, with the next move likely being a 25 bps hike in Q3 2027, and notes cuts would require significant labor-market weakening or worse energy-price fallout [^].

Key Dates & Catalysts

  • Expiration: January 01, 2027
  • Closes: January 01, 2027

10. Decision-Flipping Events

  • Trigger: Market indicators suggest a low probability of significant rate cuts in the near term.
  • Trigger: Polymarket-linked reporting around the April 28–29, 2026 window indicated a near-zero probability (~0.0025) for a 50+ bps cut after that meeting, implying very low odds for an >25 bps step around that period absent a major downside shock [^] .
  • Trigger: A market-based read of CME FedWatch-related June 16–17, 2026 pricing showed approximately 36% probability for a 25 bps cut and effectively zero probability for any cut larger than 25 bps as of April 22, 2026 [^] .
  • Trigger: The Federal Open Market Committee (FOMC) holds eight regularly scheduled meetings each year, with the Fed’s official calendar listing 2026 meeting dates and links to policy statements/minutes, which market resolution criteria typically reference [^] .

12. Historical Resolutions

No historical resolution data available for this series.