This market has settled: RESOLVED
Settled on April 3, 2026
Will the upper bound of the target federal funds rate be 1.25% at the end of 2026?
Will the upper bound of the target federal funds rate be 1.25% at the end of 2026? Odds: 0.7% YES on Polymarket. See live prices and trade this market.
This market is pricing in an exceptionally low probability that the Federal Reserve will slash interest rates to near-zero levels by late 2026, reflecting strong consensus that such dramatic easing would require a severe economic crisis. The question focuses on whether the upper bound of the fed funds rate target range will be exactly 1.25%, not merely at or below that level, which adds an additional layer of specificity that makes the outcome even less likely.
Current Odds
| Platform | Yes | No | Volume | Trade |
|---|---|---|---|---|
| Polymarket | 0.7% | 99.3% | $100K | Trade on Polymarket |
Market Analysis
The bull case for YES requires a catastrophic economic scenario unfolding over the next two years—think a financial crisis comparable to 2008, a severe recession with unemployment spiking above 8%, or a deflationary spiral that forces emergency rate cuts. The Fed would need to cut rates by approximately 400 basis points from current levels around 4.25-4.50%, requiring multiple emergency inter-meeting cuts or sustained aggressive easing at every FOMC meeting through 2026. Historical precedent exists: rates fell to 0-0.25% during both the 2008 crisis and COVID-19 pandemic, though hitting precisely 1.00-1.25% requires the Fed to stop cutting at that exact level rather than continuing to zero.
The bear case, which the market strongly favors, assumes the economy remains resilient enough to avoid depression-level conditions. Current economic data shows inflation still above the Fed’s 2% target, employment remaining robust with unemployment at 4.2%, and Fed officials repeatedly signaling a higher-for-longer stance. The December 2024 dot plot showed median Fed projections for the fed funds rate at 3.9% by end of 2025 and 3.4% by end of 2026—nowhere near 1.25%. For this market to resolve NO, rates simply need to be at any level other than precisely 1.00-1.25%, making it overwhelmingly likely given the range of possible outcomes.
Key catalysts include the eight FOMC meetings in both 2025 and 2026, with each decision potentially shifting rate expectations. The January 29, 2025 FOMC meeting will provide updated guidance, while quarterly Summary of Economic Projections (March, June, September, and December each year) offer specific dot plot forecasts. Monthly CPI and jobs reports will drive market expectations for rate cuts, with any sustained spike in unemployment above 5% or inflation falling below 2% potentially accelerating easing timelines. Watch for Q1 2025 GDP data in late April and Q2 2026 figures in late July for signs of recession that could justify emergency cuts.
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Frequently Asked Questions
Why is the market asking about 1.25% specifically rather than “at or below” a threshold?
The resolution requires the upper bound to be exactly 1.25%, meaning a target range of 1.00-1.25%. If the Fed cuts to 0.75-1.00% or 1.25-1.50%, the market resolves NO, dramatically narrowing the probability.
What would cause the Fed to stop cutting at exactly 1.00-1.25% instead of going to zero in a crisis?
The Fed would need to judge that a moderate recession requires significant but not emergency easing, or that financial stability concerns are addressed before reaching zero. This precise calibration is historically rare compared to cutting all the way to zero when crises emerge.
How quickly could rates realistically fall from current levels to 1.25% if economic conditions deteriorate?
The Fed cut rates by 500 basis points in six months during the 2008 crisis and 150 basis points in a single emergency meeting in March 2020. Reaching 1.25% from current levels would require about 300-325 basis points in cuts, feasible within 12-18 months under severe distress.