Will the Fed decrease interest rates by 25 bps after the December 2026 meeting?

This market resolves YES if the Fed cuts rates by 25 basis points at its December 2026 meeting. The current YES price is 0.011, implying a 1% probability, which looks extremely low for a decision that will be made two years from now.

Our 45% estimate reflects that by end-2026 the economic cycle will likely require easing. Inflation has been gradually returning toward target after the 2022–2023 peak, and the labor market is cooling. Historically, the Fed rarely holds rates at a peak for more than 12–18 months without cutting. If by December 2026 the policy rate is still restrictive and growth is slowing, a 25bp cut becomes a baseline scenario. The FOMC composition will also have changed by then, potentially shifting toward dovish voices.

The market underprices this because traders focus on the near term: a contract with such a distant horizon trades thinly, and the 1% price reflects illiquidity more than genuine macro assessment. For YES to win, only one 25bp cut at the specific December 2026 meeting is needed.

Main risks: persistently high inflation forcing the Fed to hold, or conversely an earlier and deeper easing cycle that leaves no change at the December 2026 meeting. A recession scenario with an aggressive 50bp cut would also fail the exact 25bp condition.