This market has settled: RESOLVED
Settled on April 9, 2026
Will the upper bound of the target federal funds rate be 1.75% at the end of 2026?
Will the upper bound of the target federal funds rate be 1.75% at the end of 2026? Odds: 0.7% YES on Polymarket. See live prices and trade this market.
The market assigns an extremely low probability to the federal funds rate returning to 1.75% by end of 2026, reflecting widespread skepticism that the Fed will cut rates to pre-2022 levels within three years given current inflation dynamics and economic projections.
Current Odds
| Platform | Yes | No | Volume | Trade |
|---|---|---|---|---|
| Polymarket | 0.6% | 99.4% | $99K | Trade on Polymarket |
Market Analysis
The bear case against this outcome is straightforward: Even with the Fed’s dual mandate of price stability and maximum employment, inflation remains structurally higher than the 2010s due to deglobalization pressures, labor market tightness, and fiscal expansion. The Fed’s own December 2024 dot plot projections showed officials expecting rates to remain around 3.4% by end of 2026, nearly double the 1.75% target. Additionally, neutral rate estimates have risen significantly, with many economists placing r-star at 2.5-3.0% rather than the sub-2% levels that prevailed before the pandemic. For rates to fall to 1.75%, the economy would likely need to enter a severe recession requiring aggressive easing—a scenario the Fed continues to argue against given persistent GDP growth.
The bull case requires a hard landing scenario that forces the Fed’s hand. If unemployment spikes above 5% in 2025-2026 while inflation finally anchors near 2%, the Fed could implement multiple 50-basis-point cuts similar to previous easing cycles. A financial crisis, commercial real estate collapse, or unexpected global slowdown could serve as catalysts. Historical precedent shows the Fed cut rates by 500+ basis points during the 2007-2008 financial crisis and again in 2020, demonstrating willingness to move aggressively when warranted.
Key catalysts to monitor include the January 28-29, 2025 FOMC meeting and subsequent dot plot updates in March, June, September, and December 2025. Monthly CPI and employment reports will drive rate expectations, with particular focus on core PCE inflation trends and wage growth data. Any signs of labor market deterioration or banking sector stress would increase odds significantly. The current market pricing suggests traders believe structural inflation forces and a higher neutral rate will prevent any return to the ultra-low rate environment of the 2010s.
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Frequently Asked Questions
What federal funds rate level would the Fed need to reach before end of 2026 for this market to resolve YES?
The upper bound of the target range would need to be exactly 1.75%, meaning the full range would be 1.50-1.75%. This requires at least 275 basis points of cuts from current levels around 4.50%.
How does this compare to the Fed’s current rate projections for 2026?
The Fed’s December 2024 Summary of Economic Projections showed median official expectations for the federal funds rate at approximately 3.4% by end of 2026, representing a full 165 basis points higher than the 1.75% level required for YES resolution.
What historical precedent exists for rate cuts of this magnitude within a two-year period?
The Fed cut rates from 5.25% to effectively 0% during 2007-2008 (financial crisis) and from 2.25% to 0% in March 2020 (pandemic), but both instances involved severe economic crises rather than standard easing cycles.