Short Answer

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

1. Market Behavior & Drivers

This prediction market has exhibited a sideways trend, trading within a relatively narrow channel between 7.7% and 14.5%. The price started at 9.1% and is currently at 9.0%, indicating that market sentiment has remained stable and consistently low throughout the trading period. The range boundaries of 7.7% and 14.5% have acted as effective support and resistance levels, respectively, containing all price action. A notable movement was the spike to 12.9% around May 19th, which represented the peak of optimism for a large rate cut. However, this increase was short-lived, and the price subsequently fell back to its baseline.
The reversion of the price to 9.0% by May 27th aligns with the provided context, where major financial institutions and experts are reported to view a rate cut this year as unlikely due to persistent inflation risks. This expert consensus appears to be the dominant factor anchoring the market's low probability assessment. The total traded volume of 24,633 contracts suggests moderate interest in the market, but the sample data points show zero volume, which could indicate that some price swings occurred on thin liquidity rather than a broad shift in conviction.
Overall, the chart suggests a strong and persistent market consensus that a Federal Reserve rate cut greater than 25 basis points will not happen this year. The price has consistently remained below 15%, reflecting the prevailing economic analysis that the Fed is expected to hold rates steady. The failure of the mid-month price spike to sustain itself further reinforces the market's conviction in this low-probability outcome, treating any contrary movements as temporary deviations from the established sentiment.
  • Severe economic deterioration may compel FOMC to implement large rate cuts.
  • Major financial institutions offer varied forecasts for the Fed's rate path.
  • New Fed Chair Kevin Warsh's policy philosophy is a relevant factor.
  • Remaining 2026 economic reports will directly influence final FOMC meetings.
  • Middle East conflict caused historic global oil supply disruption since March 2026.
  • Market sentiment has shifted strongly towards no Fed rate cuts in 2026.

Who Wins and Why

Outcome Market Model Why
In 2026 9.0% 5.8% Expectations for a large Fed rate cut are primarily focused on 2026.

Current Context

The Federal Reserve is broadly anticipated to maintain current interest rates throughout 2026. As of May 27, 2026, the central bank is widely expected to hold interest rates at their present range of 3.50%-3.75% for the foreseeable future, with a rate cut this year viewed as unlikely by most experts and markets [1][2][3]. Major financial institutions, including Goldman Sachs, have postponed their forecasts for potential cuts to late 2026 or even into 2027, citing persistent inflation risks, partly exacerbated by the Middle East conflict [1][4][3].
Prediction markets indicate a strong likelihood of no rate cuts occurring in 2026. Platforms such as Polymarket and CME FedWatch show a high probability, frequently exceeding 65-75%, that the Federal Reserve will not implement any interest rate adjustments this year [5][6][7][8]. This widespread market sentiment makes a rate cut greater than 25 basis points in 2026 extremely improbable [5][8].
Chair Warsh's Fed policy faces inflationary pressures, suggesting a 'higher-for-longer' environment. The newly appointed Federal Reserve Chair, Kevin Warsh, leads an institution whose initial policy trajectory is subject to intense speculation; while some analysts believe he may eventually advocate for easing, current economic conditions—particularly energy-related inflationary pressures—have shifted focus toward a sustained 'higher-for-longer' interest rate environment [9][10][11][2][12]. Key remaining FOMC meeting dates in 2026, including June 16–17, July 28–29, September 15–16, November 3–4, and December 15–16, will be critical junctures for potential policy pivots based on incoming data regarding inflation and labor market stability [13][14].
Sources (14)
  1. 1What’s The Fed’s Next Move? | J.P. Morgan Global Researchjpmorgan.com
  2. 2Fed seen holding rates steady not hiking under Warsh - TheStreetthestreet.com
  3. 3Fed predictions for 2026: What experts say about the possibility of rate cuts this yearfinance.yahoo.com
  4. 4Federal Reserve Rate Cuts 2026: Goldman Sachs Delays Forecast to Decemberintellectia.ai
  5. 5How many Fed rate cuts in 2026? Predictions & Odds | Polymarketpolymarket.com
  6. 6Fed minutes reveal growing support for rate hikes, impacting 2026 cut predictionscryptobriefing.com
  7. 7Fed rate cut probability before 2027 drops, lowest in monthscryptobriefing.com
  8. 8How Many Fed Cuts in 2026? Polymarket Breakdownlaikalabs.ai
  9. 9PCE Data, Jobless Claims Test Fed's Rate Path: Crypto Week Ahead | Fazen Marketsfazen.markets
  10. 10BlackRock Predicts Fed Rate Cuts Possible in 2026 as Markets Price June Unchanged at 98.1% | Gate Newsgate.com
  11. 11BlackRock Announces Surprise FED Prediction for 2026! What Are Bitcoin and the Markets Pricing? - Bitcoin Sistemien.bitcoinsistemi.com
  12. 12What to Expect From Kevin Warsh’s Fed in the First 100 Days | Council on Foreign Relationscfr.org
  13. 13The Fed - Monetary Policy:federalreserve.gov
  14. 14The Fed - Meeting calendars and informationfederalreserve.gov

2. Price Chart

Historical Price (Probability)

Outcome probability
Date

3. Market Data

Contract Snapshot

This market resolves to YES if the Federal Reserve implements a single interest rate cut greater than 25 basis points (e.g., 50bps or more) before December 31, 2026, including during non-scheduled meetings. Cumulative cuts that add up to more than 25 basis points are not sufficient; it must be a single rate reduction event. If no such cut occurs by the December 31, 2026 deadline, the market resolves to NO, with outcomes verified by the Federal Reserve.

Available Contracts

Market options and current pricing

Outcome bucket Yes (price) No (price) Last trade probability
In 2026 $0.11 $0.92 9%

Market Discussion

Traders are primarily discussing a widespread misunderstanding of the market rules, noting that many initially believed "a rate cut greater than 25bps" referred to cumulative cuts throughout the year, rather than a single rate cut exceeding 25 basis points. The only explicit argument for a "Yes" outcome suggests potential political pressure from a new administration could lead to such a large, single cut.

There are no direct arguments for "No" in the discussion. However, the comments indicate significant confusion among participants about the specific definition, with some feeling misled after taking positions. The market's current low probability (0.7%) for a "Yes" outcome suggests a strong consensus that a single rate cut greater than 25 basis points is unlikely to occur this year.

4. Trust Index

Octagon Trust Index Kalshi 57 Caution

Official decision: one office decides and holds the answer before the public

Integrity risk· Information exposure

How it adds up
Integrity80% of score64Caution
Trade quality20% of score30High Risk

Includes the cost to trade: a $10,000 order can't be filled here because the order book is too thin.

Trust score57Caution

Weighted blend with hard caps — a critically weak safety pillar, or a severe trading anomaly, caps the total regardless of the rest. Full methodology · About the Trust Index

Trust profile
Integrity4 screens run · 3 don't apply · 3 awaiting data
Market integrity
79Good

Outcome is hard to influence

Thin-volume movesTrade signals · high confidence

“In 2026” made a large jump with almost no trading behind it.

Large tradesTrade signals · medium confidence

Largest single print on KXLARGECUT-26 carried 47% of its $1,736 tape (window is 100% of 24h flow; print is 7d old)

Screened clean
Size patternsNo distribution read Clear
2 screens not run
Outcome control · doesn't apply to this market type
Thin-leg conviction · doesn't apply to this market type
Info fairness
30High Risk
Information exposureStructural risk · medium confidence

Official decision: one office decides and holds the answer before the public

4 screens not run
Move vs. catalyst · data source not connected
Longshot repricing · data source not connected
Pre-broadcast certainty · doesn't apply to this market type
Cross-venue timing · data source not connected
Resolution quality
92Strong

Resolution mechanism is dependable

No suspicious activity on any screen

Resolution rules read: Clear

Liquidity
38Very thin

Hard to fill near the screen price

1 contract

In 202638
Very thin · low confidence

Light recent trading — size may not fill near the screen price.

Book spread 80% vs realized 8%
Move quality
60Mostly confirmed

Most moves carried real volume

1 contract

In 202660
Mostly confirmed · medium confidence

Volume opposes the move over 24h

Rule clarity
95Clear

Counts toward Resolution quality, not here

1 contract

In 202695
Clear · high confidence

Objective result from a trusted source (allowlist)

allowlist · Clear
Trade quality
30High Risk

Order book is critically thin

Thin market — entering or exiting at fair value will be difficult.

Outcome quality 38 (notional-weighted)

$100 order: 1.1c slippage (~39% of a 2.8c contract)

$1,000 order: 2.5c slippage (~89% of a 2.8c contract)

$10,000 order: book too thin to fill

In 202638Market scoreLiquidity38Move quality60Rule clarity95
Why 38
Liquidity
38 · Very thin · low confidence

Light recent trading — size may not fill near the screen price.

Book spread 80% vs realized 8%
Move quality
60 · Mostly confirmed · medium confidence

Volume opposes the move over 24h

Rule clarity
95 · Clear · high confidence

Objective result from a trusted source (allowlist)

allowlist · Clear

underwriting_v1.4 · computed Sep 23, 2026

5. What level of economic deterioration in the second half of 2026 would compel the FOMC to implement a rate cut greater than 25bps?

Potential future rate cut200-300 basis points [1]
Great Recession largest cut100 bps (December 2008) [2][3][4]
COVID-19 unscheduled cuts150 bps (March 2020) [5][4]
Severe economic deterioration would compel the FOMC to implement large rate cuts. The Federal Open Market Committee (FOMC) would consider implementing a rate cut greater than 25 basis points in the second half of 2026 if the U.S. economy slows sharply, potentially leading to cuts ranging from 200 to 300 basis points [1]. Such aggressive monetary easing has historically coincided with severe economic deterioration and recessions [6][3][7][2]. For instance, during the Great Recession, when GDP fell by over 4%, the FOMC lowered the federal funds rate through cuts including a 100 basis point reduction in December 2008 and a 50 basis point cut in October 2008 [2][3][4]. Similarly, in response to the COVID-19 pandemic, the Fed implemented two unscheduled rate cuts in March 2020, totaling 150 basis points [5][4].
Key triggers for aggressive rate cuts involve labor and financial markets. Primary drivers for these drastic measures include a severe labor market deterioration, marked by a rapid and substantial increase in the unemployment rate and jobless claims [3][7][2][4]. This aligns with the Fed's dual mandate for maximum employment [6][8]. Additionally, widespread financial market instability, such as a "dash for cash" scenario or severe market liquidity deterioration threatening the flow of credit, could prompt such actions [3][5][9][6][8]. Rapid disinflationary or deflationary pressures, where inflation falls significantly below target, would also be a compelling factor [3][5][9][6][8]. An example of combined triggers was a 50 basis point cut in September 2024, made in response to declining inflation alongside weaker employment data [10][11].
Sources (11)
  1. 1ubs.com
  2. 2intereconomics.eu
  3. 3federalreservehistory.org
  4. 4forbes.com
  5. 5brookings.edu
  6. 6jdhwealth.com
  7. 7treasurefi.com
  8. 8raymondjames.com
  9. 9dallasfed.org
  10. 10elpais.comenglish.elpais.com
  11. 11atradius.us

6. What is the consensus forecast from major financial institutions like Goldman Sachs and J.P. Morgan for the Fed's rate path through the end of 2026?

J.P. Morgan 2026 Rate ExpectationHold rates steady [1][2]
Late 2026 Fed Funds RateNear 3.8% [3][4][5]
2026 Zero Rate Cut ProbabilityApproximately 70% [6]
Major financial institutions offer varied forecasts for the Fed's rate path. The consensus from major financial institutions presents a mixed, yet generally cautious, outlook for the Federal Reserve's rate path through the end of 2026, strongly leaning towards either maintaining current rates or implementing delayed, smaller cuts. J.P. Morgan Global Research anticipates that the Fed will keep rates steady for the remainder of 2026, with the next projected move being a 25 basis point hike in the third quarter of 2027 [1][2]. In contrast, Goldman Sachs maintains that there remains potential for the Fed to cut rates later in 2026, with some projections indicating as many as two 25-basis-point reductions, though the timing is highly uncertain and dependent on inflation and labor market trends [7][8]. Other prominent financial analysts have similarly adjusted their expectations, deferring final Fed rate cuts to late 2026 or early 2027, while also acknowledging a reasonable likelihood of the Fed remaining on hold indefinitely [9].
Broader financial markets largely anticipate the Fed will hold rates. Broad financial market sentiment, as evidenced by tools such as CME FedWatch and futures, predominantly suggests the Federal Reserve will remain on hold through the end of 2026 [3][4][5]. Futures markets are pricing in a Fed funds rate level near 3.8% by late 2026 [3][4][5]. Additionally, prediction markets like Polymarket show a high probability, approximately 70%, assigned to the outcome of zero rate cuts in 2026 [6]. This implies that market participants consider a rate cut greater than 25 basis points this year to be highly unlikely [6].
Sources (9)
  1. 1What’s The Fed’s Next Move? | J.P. Morgan Global Researchjpmorgan.com
  2. 2The Fed - Monetary Policy:federalreserve.gov
  3. 3Top brokerages sharply split on Fed's 2026 policy outlook - Reutersreuters.com
  4. 4Fed Funds Rate Forecast 2026-2031 | StreetStatsstreetstats.finance
  5. 5Fed predictions for 2026: What experts say about the possibility of rate cuts this yearfinance.yahoo.com
  6. 6How many Fed rate cuts in 2026? Predictions & Odds | Polymarketpolymarket.com
  7. 7Goldman Sachs Asset Management Market Pulse May 2026am.gs.com
  8. 8Goldman Sachs drops cautious signal for Fed rate cuts in 2026sg.finance.yahoo.com
  9. 9Macro at a Glance Latest views and forecastscfsrating.com

7. How does new Fed Chair Kevin Warsh's stated monetary policy philosophy compare to that of his predecessors regarding aggressive rate cuts versus inflation control?

Fed Chair Sworn InMay 22, 2026 [1][2][3][4]
Past Monetary StanceHawkish on inflation, notably during 2008 financial crisis [5]
Current Policy AdvocacyLower interest rates, citing AI-driven productivity gains [5][6][7][8]
Kevin Warsh assumed the Federal Reserve chairmanship amidst evolving policy views. He was sworn in as the 11th Chair of the Federal Reserve on May 22, 2026 [1][2][3][4]. Historically, Warsh has been described as hawkish on inflation, a stance particularly evident during the 2008 financial crisis [5]. More recently, however, he has advocated for lower interest rates, basing this shift on the premise that AI-driven productivity gains could effectively mitigate inflationary pressures [5][6][7][8].
Observers characterize Warsh as conditionally flexible rather than strictly ideological. Critics view him as 'conditional' or politically adaptable, rather than purely hawkish or dovish, noting a tendency to support lower rates during Republican administrations [9][10][8]. As of late May 2026, Warsh faces the immediate challenge of surging inflation while navigating political pressure from President Trump to implement rate cuts [3][8][11]. Analysts anticipate that he will struggle to justify aggressive cuts as long as inflation remains above the target level [3][8][11].
Sources (11)
  1. 1Kevin Warsh - The New Fed Chair: What the World Can Expect - Veritas Europaeaveritaseuropaea.eu
  2. 2Kevin Warsh to be sworn in as Federal Reserve chair on Fridaycnbc.com
  3. 3Kevin Warsh sworn in as Fed chair at pivotal moment for US economy | CNN Businesscnn.com
  4. 4Federal Reserve Board - Kevin Warsh takes oath of office as chairman and a member of the Board of Governors of the Federal Reserve System, and the Federal Open Market Committee unanimously selects Warsh as its chairmanfederalreserve.gov
  5. 5My Thoughts on Kevin Warsh - by Marko Bjegovicarkominaresearch.substack.com
  6. 6Trump’s Fed Pick Kevin Warsh Could Be Just What the Central Bank Needscity-journal.org
  7. 7Is Kevin Warsh a Hawk, a Dove, or the Next Volcker? Markets Are About to Find Outnews.bitcoin.com
  8. 8Kevin Warsh is now leading the Fed. His main challenge is a doozy. - CBS Newscbsnews.com
  9. 9Kevin Warsh and Weathervane Economics - Paul Krugmanpaulkrugman.substack.com
  10. 10Kevin Warsh: A Hawk in Dove's Clothing? - by Peter Coypetercoy.substack.com
  11. 11Warsh Takes Charge of a Fed Facing Rising Inflation Threatnytimes.com

8. What are the key dates for the remaining 2026 CPI, PCE, and Jobs Report releases that will directly influence the final three FOMC meetings?

August 2026 CPI Release DateSeptember 11, 2026 [1]
September 2026 Jobs Report Release DateOctober 2, 2026 [2]
November 2026 PCE Release DateNovember 25, 2026 [3]
Key economic reports will influence the final 2026 FOMC meetings. The final three Federal Open Market Committee (FOMC) meetings in 2026 are scheduled for September 15-16, October 27-28, and December 8-9 [4][5][6][7][8]. These meetings will be directly influenced by forthcoming releases of the Consumer Price Index (CPI), Personal Consumption Expenditures (PCE), and Jobs Report data. Ahead of the September meeting, August data for the Employment Situation Report, CPI, and PCE are critical [2][3][1].
September and October FOMC meetings hinge on specific economic data. For the September 15-16, 2026 FOMC meeting, the August 2026 Employment Situation Report is due September 4, 2026 [2], the August 2026 CPI on September 11, 2026 [1], and the August 2026 PCE data on August 26, 2026 [3]. The subsequent October 27-28, 2026 FOMC meeting will consider the September 2026 Employment Situation Report, set for October 2, 2026 [2], the September 2026 CPI on October 14, 2026 [1], and the September 2026 PCE data, which will be released on September 30, 2026 [9][3].
December's FOMC meeting will analyze November's crucial economic indicators. Leading up to the December 8-9, 2026 FOMC meeting, the November 2026 Employment Situation Report is scheduled for December 4, 2026 [2]. Additionally, the October 2026 CPI data is expected on November 10, 2026 [1], and the November 2026 PCE data is slated for release on November 25, 2026 [3].
Sources (9)
  1. 1bls.gov
  2. 2bls.gov
  3. 3tradingcalendar.com
  4. 4equalsmoney.com
  5. 5federalreserve.gov
  6. 6aba.combankingjournal.aba.com
  7. 7zforex.com
  8. 8federalreserve.gov
  9. 9stlouisfed.orgfred.stlouisfed.org

9. What specific developments in the Middle East conflict could significantly alter energy prices and the Federal Reserve's inflation forecast before year-end 2026?

Brent Crude Priceabove $108 per barrel [1][2][3]
PCE Inflation Forecast2.7% as of May 2026 [2][4][3]
Global Oil Output Reduction6.6% in Q2 2026 [1][2][3]
Strait of Hormuz closure caused historic global oil supply disruption. The de facto closure of the Strait of Hormuz since March 2026 has caused the largest global oil supply disruption in history, driving Brent crude prices above $108 per barrel and reducing global oil output by approximately 6.6% in Q2 2026 [1][2][3]. This Middle East conflict is anticipated to trigger the biggest energy price surge in four years [4].
Fed revised inflation forecast upwards due to energy shocks. In response to these developments, the Federal Reserve revised its PCE inflation forecast upward to 2.7% as of May 2026. Federal Reserve officials have indicated that persistent energy price shocks pose a risk of de-anchoring long-term inflation expectations [2][4][3].
Fed officials now lean towards rate hikes, not cuts. The conflict has prompted Federal Reserve officials to shift from a base case of interest rate cuts to a stance of extreme caution. Some policymakers have explicitly mentioned the potential for a series of rate hikes if inflation pressures from the conflict continue to intensify [5][6][7]. Prediction markets and analyst forecasts currently assign a very low probability to Fed rate cuts in 2026, with the dominant market expectation being for zero rate cuts, making a rate cut greater than 25bps highly unlikely [8][9].
Sources (9)
  1. 1Strait of Hormuz and the oil shock of 2026jkempenergy.com
  2. 2Hormuz Shock: Strait Closure Reshapes Global Economy in 2026 | energy | informed, clearlyinformedclearly.com
  3. 3How the War in the Middle East Is Affecting Energy, Trade, and Financeimf.org
  4. 4Middle East War to Spark Biggest Energy Price Surge in Four Yearsworldbank.org
  5. 5Fed's Kashkari: Middle East risks may trigger series of rate hikesfxstreet.com
  6. 6Fed Govs. express concern about inflation due to Iran war | American Bankeramericanbanker.com
  7. 7Fed expected to stand pat on interest rates amid ongoing uncertainty from Iran conflictfinance.yahoo.com
  8. 8How many Fed rate cuts in 2026? Predictions & Odds | Polymarketpolymarket.com
  9. 9Fed predictions for 2026: What experts say about the possibility of rate cuts this yearfinance.yahoo.com

10. What Could Change the Odds

Key Catalysts

Markets have shifted strongly toward “no rate cuts in 2026,” with Kalshi-style odds reporting 69.8% YES for “no Fed rate cuts happen in 2026” and 32.9% odds for any cut before 2027, which materially lowers the probability of a single-event cut larger than 25 bps in 2026 [1][2]. Prediction-market probability for “How many Fed rate cuts in 2026?” shows the top outcome as “0 (0 bps)” around ~70%, with the next outcome “1 (25 bps)” around ~17% [3].
Several strategists no longer expect the Federal Reserve to cut rates in 2026. Nomura “no longer expects the Federal Reserve to cut rates in 2026,” after previously forecasting two 25 bp cuts later in the year [4]. Similarly, J.P. Morgan Global Research’s base case is that the Fed will “remain on hold … for the rest of 2026,” with the next move likely being a 25 bp hike in Q3 2027; this implies near-zero odds for a >25 bps cut in 2026 [5].

Key Dates & Catalysts

  • Expiration: January 01, 2027
  • Closes: January 01, 2027
Sources (5)
  1. 1Fed rate cut probability before 2027 drops, lowest in monthscryptobriefing.com
  2. 2Fed rate cut before 2027 slips to 32.9% chance, lowest in monthscryptobriefing.com
  3. 3How many Fed rate cuts in 2026? Predictions & Odds | Polymarketpolymarket.com
  4. 4Nomura now sees no Fed rate cuts in 2026 as inflation pressure buildsinvezz.com
  5. 5What’s The Fed’s Next Move? | J.P. Morgan Global Researchjpmorgan.com