How many Fed rate cuts in 2026?
Short Answer
Both the model and the market expect 0 Fed rate cuts in 2026, with no compelling evidence of mispricing.
1. Executive Verdict
- Markets anticipate zero rate cuts through 2026, aligning with current Fed policy.
- Chair Warsh's policy prioritizes price stability, supporting no interest rate cuts.
- The July 2026 FOMC meeting maintained rates, signaling the Federal Reserve's current hold.
Who Wins and Why
| Outcome | Market | Model | Why |
|---|---|---|---|
| 0 (0 bps) | 88.6% | 81.6% | Expectations of persistent inflation support a 'higher for longer' interest rate environment, leading to no rate cuts. |
| 11 (275 bps) | 0.1% | 0.8% | A rapid disinflationary environment, if underestimated, could provide ample room for significant policy easing. |
| 10 (250 bps) | 0.1% | 0.8% | Historical Fed patterns suggest a willingness to cut aggressively in response to severe economic downturns. |
| 9 (225 bps) | 0.1% | 0.8% | Unforeseen 'black swan' events or rapid financial deterioration could force significant and aggressive rate cuts. |
| 6 (150 bps) | 0.3% | 0.8% | A clearer economic slowdown or strong disinflationary trend might necessitate multiple, sustained rate cuts. |
Current Context
Market participants largely anticipate zero Federal Reserve rate cuts in 2026. As of early August 2026, the Federal Reserve has maintained the federal funds rate target range at 3.50%–3.75% throughout the year, with no rate cuts implemented year-to-date [^][^][^]. Prediction market platforms, including Polymarket and Kalshi, price the probability of zero rate cuts in 2026 at approximately 80%–89% [^][^][^].
Chair Kevin Warsh maintains a hawkish stance, reinforced by recent FOMC votes. Warsh, who succeeded Jerome Powell, leads a committee where his approach is described as hawkish; some market participants even expect potential rate hikes over cuts [^][^][^][^]. At the July 2026 FOMC meeting, the committee voted 9-3 to maintain the current interest rate, with three regional bank presidents dissenting in favor of a 0.25 percentage point hike [^][^][^]. The FOMC also held the federal funds rate at this range in its June 2026 meeting [^]. The effective federal funds rate was 3.63% in July 2026, consistent with the maintained target range [^][^].
Inflation and employment data drive future Fed policy decisions. The Federal Open Market Committee had paused rate cuts in early 2026, following a series of reductions in 2025 [^]. Market participants and policymakers continue to monitor inflation and employment data, with officials like NY Fed President John Williams emphasizing a data-dependent approach to future monetary policy decisions [^].
2. Market Behavior & Price Dynamics
Historical Price (Probability)
Outcome probability
Date
This market has traded in a narrow, sideways channel since its inception, with the probability of zero Fed rate cuts in 2026 holding between 84.4% and 89.7%. This range establishes an effective support floor in the mid-84% area and resistance just below 90%. The current price of 88.7% sits near the top of this channel, reflecting a persistent and strong market consensus that the Federal Reserve will not implement any rate cuts during the calendar year.
The most recent upward price move, from 85.2% on July 28 to 88.7% on August 4, followed Federal Reserve statements confirming the federal funds rate target would remain at 3.50%-3.75%. This news appears to have reinforced the market's hawkish outlook. The defining technical characteristic of this market, however, is the total trading volume of zero contracts. All price action is synthetic, likely driven by automated market maker adjustments or an inactive order book rather than by capital deployment. The absence of volume signifies an untested market. While the price level implies high conviction, there is no evidence of capital committed to defending this view.
3. Market Data
Contract Snapshot
This market resolves to "Yes" for the outcome matching the exact number of 25 basis point (bps) rate cuts made by the Federal Reserve in 2026, including emergency cuts and those from the December meeting. A 50 bps cut counts as two cuts, and any cut between 1-24 bps counts as one; an outcome resolves "No" if its specified number of cuts is not met or becomes impossible. Official FOMC statements and the Federal Reserve website are the resolution sources, with the market closing on December 31, 2026, 11:59 PM ET.
Available Contracts
Market options and current pricing
| Outcome bucket | Yes (price) | No (price) | Last trade probability |
|---|---|---|---|
| 0 (0 bps) | $0.89 | $0.11 | 89% |
| 1 (25 bps) | $0.08 | $0.93 | 7% |
| 2 (50 bps) | $0.03 | $0.98 | 2% |
| 3 (75 bps) | $0.01 | $0.99 | 1% |
| 12+ (300+ bps) | $0.00 | $1.00 | 0% |
| 4 (100 bps) | $0.00 | $1.00 | 0% |
| 6 (150 bps) | $0.00 | $1.00 | 0% |
| 5 (125 bps) | $0.00 | $1.00 | 0% |
| 7 (175 bps) | $0.00 | $1.00 | 0% |
| 10 (250 bps) | $0.00 | $1.00 | 0% |
| 11 (275 bps) | $0.00 | $1.00 | 0% |
| 8 (200 bps) | $0.00 | $1.00 | 0% |
| 9 (225 bps) | $0.00 | $1.00 | 0% |
Market Discussion
The market overwhelmingly anticipates zero Fed rate cuts in 2026, with an 88.7% implied probability, largely driven by persistent inflation pressures and a resilient U.S. economy. Traders' consensus, aligning with futures pricing and analyst baselines, favors a pause or modest tightening. Recent FOMC meetings, specifically in July 2026, reinforced this outlook by holding rates steady, with some committee members even favoring hikes, rather than cuts, signaling ongoing internal debate but no reductions.
4. What specific inflation and unemployment data in Q4 2026 could trigger a dovish pivot from Fed Chair Kevin Warsh?
| Chair Start Date | May 22, 2026 [^][^][^][^] |
|---|---|
| Q4 2026 Pivot Thresholds | Not publicly specified [^] |
| Primary Policy Concerns | Persistent inflation and labor market conditions [^][^][^][^] |
Fed Chair Warsh prioritizes data-driven policy without explicit thresholds. Kevin Warsh, who took office on May 22, 2026 [^][^][^][^], has not publicly specified exact Q4 2026 data thresholds that would trigger a dovish policy pivot [^]. His leadership is marked by a shift towards a data-driven approach, evidenced by signals to reduce the Federal Reserve's use of forward guidance and consideration of reducing the frequency of policy meetings to observe economic data "directly and unfiltered" [^][^][^]. Additionally, he has established task forces to re-examine the Fed's inflation frameworks, data usage, and productivity assessments [^].
A pivot would likely address inflation or labor market concerns. While specific Q4 2026 data thresholds for a dovish pivot remain undisclosed by Chair Warsh [^], potential policy shifts under his leadership would likely be guided by established mandate concerns. These include persistent upward pressure on inflation above 2% or a marked deterioration in labor market conditions [^][^][^]. Surveys also indicate that ongoing labor market weakness is a primary driver for potential future easing decisions among respondents [^][^][^].
5. What statements and voting records from FOMC Chair Kevin Warsh support the market's expectation of zero rate cuts in 2026?
| Expected 2026 Rate Cuts | Zero [^][^][^] |
|---|---|
| FOMC Chair Appointment | May 22, 2026 [^][^][^] |
| Year-end 2026 Federal Funds Rate Projection | 3.8% [^] |
FOMC Chair Kevin Warsh's early actions aligned with market expectations of no 2026 rate cuts. Warsh, who assumed the role on May 22, 2026 [^][^][^], has consistently prioritized restoring price stability and has refrained from offering forward guidance on future rate adjustments [^][^][^]. Under his leadership, the Federal Open Market Committee (FOMC) maintained interest rates at their existing levels during the June 2026 meeting [^]. These statements and actions have aligned with market expectations of zero rate cuts in 2026 [^][^][^].
Warsh's reputation influenced market expectations for steady or higher rates. Market participants interpreted the transition to Chair Kevin Warsh as a clear signal that the Federal Reserve was unlikely to reduce interest rates in 2026 [^]. His reputation as a policy independent and a skeptic of quantitative easing and emergency-era policies led traders to discount expectations of aggressive Fed rate cuts for the year [^][^]. This shift was reflected in the median projection for the federal funds rate at year-end 2026, which increased to 3.8% from 3.4% in March, indicating a market sentiment leaning towards potential hikes or sustained rates due to his perceived hawkish stance [^][^][^][^].
6. How does the monetary policy approach of the FOMC under Kevin Warsh in 2026 differ from the committee's approach under Jerome Powell in the post-pandemic era?
| Chair Appointment Date | May 22, 2026 [^][^][^][^][^] |
|---|---|
| Key Policy Principle | Price stability with the view that 'inflation is a choice' [^][^][^] |
| Monetary Policy Framework | 'Two-tools' approach: balance sheet reduction alongside interest rate policy [^][^][^] |
Kevin Warsh's Fed approach prioritizes price stability over market intervention. Kevin Warsh assumed the role of Federal Reserve Chair on May 22, 2026, succeeding Jerome Powell [^][^][^][^][^]. Chair Warsh's monetary policy is characterized by a strong emphasis on price stability, reflecting the view that 'inflation is a choice,' and employs a 'two-tools' framework [^][^][^]. This framework prioritizes reducing the Federal Reserve's balance sheet alongside interest rate policy [^][^][^]. This approach contrasts directly with the post-pandemic era under Jerome Powell, which heavily relied on broad market interventions and an expanded balance sheet [^][^][^].
Warsh's FOMC maintains ample reserves, skeptical of large asset purchases. Under Chair Warsh in 2026, the Federal Open Market Committee (FOMC) has maintained an ample reserves framework and signaled a clear emphasis on inflation control [^][^][^]. The committee demonstrates skepticism toward large-scale asset purchases or emergency-style policy settings [^][^][^]. Additionally, Chair Warsh is actively considering reducing the frequency of scheduled FOMC meetings for setting interest rates [^]. These collective elements distinguish his committee's monetary policy approach from the prior period under Jerome Powell [^][^][^].
7. Which global economic or geopolitical shocks in late 2026 could force the Federal Reserve to implement emergency rate cuts?
| Primary Geopolitical Risk (Aug 2026) | U.S.–Iran conflict and energy market disruption [^][^][^][^][^] |
|---|---|
| Fed Policy Focus (Aug 2026) | Navigating persistent inflationary pressures [^][^][^][^] |
| Market Expectation for Rate Cuts (Late 2026) | No anticipation of emergency rate cuts [^][^][^][^][^][^][^][^] |
The primary global economic or geopolitical shock in late 2026 is an ongoing U.S.–Iran conflict. This conflict, identified by Federal Reserve officials as the leading geopolitical risk as of August 2026, contributes to oil price volatility and threatens supply chains through the Strait of Hormuz, consequently putting upward pressure on inflation [^][^][^][^][^][^][^][^][^]. The Federal Reserve Bank of Chicago and Federal Reserve Bank of Boston have both highlighted the potential macroeconomic scenarios and vulnerability of the U.S. economy to such oil shocks [^][^][^].
Despite these existing inflationary pressures, the Federal Reserve prioritizes navigating persistent inflationary concerns. As of August 2026, Federal Reserve officials have indicated that current monetary policy is not geared toward implementing emergency rate cuts [^][^][^][^]. Emergency rate cuts are typically reserved for more severe crises, such as a systemic financial collapse, a rapid freezing of credit markets, or a deep recession characterized by a sharp increase in unemployment [^].
Market expectations generally do not anticipate emergency rate cuts through 2026. While financial analysts are monitoring a potential combined economic shock involving rising oil prices, new trade barrier impacts, and a possible tech stock market collapse [^], market indicators suggest stability. The Federal Reserve Bank of New York's Survey of Market Expectations through July 2026 and CME Group's 30-Day Federal Funds futures pricing as of July 23, 2026, reflect an alignment with a stable interest rate environment for the remainder of 2026 [^][^][^]. Furthermore, prediction markets as of August 4, 2026, heavily lean towards zero or one rate cut for the remainder of the year [^][^][^][^][^].
8. What does the voting breakdown of the July 2026 FOMC meeting reveal about the committee's balance between hawks and doves?
| Federal Funds Rate Target | Maintained at 3-1/2 to 3-3/4 percent (July 2026 FOMC) [^][^][^][^] |
|---|---|
| Members Dissenting for Rate Hike | 3 members (Beth M. Hammack, Neel Kashkari, Lorie K. Logan) [^][^][^] |
| Members Dissenting for Rate Cut | 2 members (Stephen Miran, Christopher Waller) [^] |
Conflicting reports detailed the exact voting breakdown and nature of the dissent. One account indicated a 9–3 vote to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent [^][^][^]. In this instance, Beth M. Hammack, Neel Kashkari, and Lorie K. Logan dissented, preferring to raise the target range by 1/4 percentage point. This stance was corroborated by Cleveland Fed President Beth Hammack's separate statement confirming her dissent in favor of raising rates [^][^][^][^][^].
Conversely, another report on the July 28–29, 2026, meeting stated a 10–2 vote to maintain the federal funds target rate range at 3.50% to 3.75% [^] . Here, members Stephen Miran and Christopher Waller dissented, advocating for a 25 basis point rate cut [^]. The presence of dissenters favoring both rate increases and decreases underscores the intricate and multi-directional nature of the committee's divisions during this meeting [^][^].
9. What Could Change the Odds
Key Catalysts
Prediction markets, as of August 4, 2026, anticipate zero Federal Reserve interest rate cuts for the remainder of 2026, with probability estimates ranging from approximately 87% to 89% for no cuts [^] [^] . The Federal Reserve maintained the target range for the federal funds rate at 3.50% to 3.75% at its July 2026 FOMC meeting [^]. As of August 4, 2026, the federal funds rate target range is 3.50% to 3.75% [^][^].
Several factors could shift this outlook. Federal Reserve Chair Kevin Warsh has implemented a new, less predictable policy framework that relies on internal task forces and has abandoned traditional forward guidance [^][^][^]. The July 2026 FOMC meeting included three members dissenting in favor of a rate hike [^]. Additionally, the Federal Reserve is considering reducing the number of regularly scheduled meetings at which it sets interest rates [^]. Following a CPI inflation report, investors are pricing in a growing chance, currently less than 50%, that the Fed raises interest rates this week [^]. The CME FedWatch tool serves as the standard market-implied mechanism for assessing expectations of future FOMC rate changes [^][^][^].
Key Dates & Catalysts
- Closes: December 31, 2026
10. Decision-Flipping Events
- Trigger: Prediction markets, as of August 4, 2026, anticipate zero Federal Reserve interest rate cuts for the remainder of 2026, with probability estimates ranging from approximately 87% to 89% for no cuts [^] [^] .
- Trigger: The Federal Reserve maintained the target range for the federal funds rate at 3.50% to 3.75% at its July 2026 FOMC meeting [^] .
- Trigger: As of August 4, 2026, the federal funds rate target range is 3.50% to 3.75% [^] [^] .
- Trigger: Several factors could shift this outlook.
12. Historical Resolutions
No historical resolution data available for this series.
