This market has settled: RESOLVED
Settled on May 5, 2026
Fed rate cut by December 2026 meeting?
Fed rate cut by December 2026 meeting? Odds: 45.5% YES on Polymarket. See live prices and trade this market.
The market pricing a rate cut by December 2026 at 45.5% reflects deep uncertainty about whether the Federal Reserve will shift from its current restrictive policy stance over the next two years, with traders essentially viewing this as a coin flip dependent on inflation’s trajectory and labor market resilience.
Current Odds
| Platform | Yes | No | Volume | Trade |
|---|---|---|---|---|
| Polymarket | 45.5% | 54.5% | $100K | Trade on Polymarket |
Market Analysis
The bull case for a rate cut centers on inflation continuing its disinflation trend toward the Fed’s 2% target, allowing policymakers to normalize rates from restrictive territory. If core PCE inflation maintains its downward path through 2025-2026 and the unemployment rate rises meaningfully above 4%, the Fed would have clear justification to ease policy. Historical precedent shows the Fed rarely keeps rates at restrictive levels once inflation is durably controlled, and by late 2026, rates could be well above neutral even after several cuts. A recession scenario—whether triggered by cumulative tightening effects or external shocks—would virtually guarantee cuts, potentially multiple ones before the December 2026 meeting.
The bear case argues that sticky services inflation, particularly in shelter and wages, could keep core inflation elevated above target through 2026, forcing the Fed to maintain higher rates longer than markets anticipate. If the labor market remains tight with wage growth above 4% and unemployment below 4%, Powell’s Fed has shown willingness to prioritize inflation control over growth concerns. Additionally, if productivity gains continue offsetting wage pressures and GDP growth remains solid around 2-3%, the Fed faces no urgency to cut even if inflation moderates slowly. The “higher for longer” scenario envisions the Fed keeping rates restrictive throughout 2025-2026 without economic deterioration severe enough to force their hand.
Key catalysts include the January 29, 2025 FOMC decision and subsequent meetings in March and May 2025, where dot plot projections will signal the committee’s rate path expectations. Monthly CPI and PCE releases throughout 2025, particularly January CPI (February 12) and December 2024 PCE (January 31), will determine whether disinflation stalls or accelerates. Employment reports, especially the January NFP (February 7) and subsequent monthly releases, will show whether labor market cooling continues or reaccelerates. The Fed’s June 2025 Summary of Economic Projections will be critical for understanding where policymakers see rates heading into 2026. Traders should monitor the spread between current rates and estimated neutral rate (around 3%), as a wider gap increases cut probability while any Fed rhetoric around “well-calibrated” policy suggests comfort maintaining current levels.
Related Markets
- Fed rate hike in 2026? — 24% YES
Frequently Asked Questions
Does this market resolve YES only if rates are cut at the December 2026 meeting specifically, or anytime before then?
The market resolves YES if the Fed implements a rate cut by or at the December 2026 FOMC meeting, meaning any cut during 2025 or 2026 up to and including that meeting would trigger a YES resolution.
How many rate cuts would the Fed likely implement if they start cutting before December 2026?
Historical patterns suggest the Fed typically cuts in cycles rather than single moves—if economic conditions warrant a cut by late 2026, there would likely be multiple 25bp cuts preceding it, potentially 3-6 cuts depending on whether it’s gradual normalization or recession response.
What current Fed funds rate level would make a December 2026 cut most likely?
If the Fed holds rates at current levels (5.25-5.50% range) through mid-2025 while inflation falls below 2.5%, the probability of cuts by late 2026 increases significantly since rates would remain restrictive relative to a neutral rate estimated around 3%.