Prediction markets are signaling a shift toward a “higher-for-longer” interest rate outlook following the Federal Reserve’s latest policy decision, with some traders even pricing in the possibility of additional rate hikes later this year. At its most recent meeting, the Federal Reserve held its benchmark federal funds rate steady at 3.50%–3.75%, a move that was widely anticipated. However, remark...
Prediction markets are signaling a shift toward a “higher-for-longer” interest rate outlook following the Federal Reserve’s latest policy decision, with some traders even pricing in the possibility of additional rate hikes later this year. At its most recent meeting, the Federal Reserve held its benchmark federal funds rate steady at 3.50%–3.75%, a move that was widely anticipated. However, remarks from Chair Jerome Powell appear to have reinforced expectations that policy may remain restrictive for an extended period. Data from the prediction market Kalshi shows traders increasingly assigning probabilities to higher rates by year-end. Market participants currently see a 53% likelihood that the federal funds rate will exceed 5.25% following the December FOMC meeting, compared to a 32% probability that rates remain above 2.75%. The dispersion in forecasts highlights ongoing uncertainty around the path of monetary policy, as investors weigh persistent inflation risks against signs of slowing economic momentum and geopolitical tensions. Outlined below is what traders on Kalshi are pricing in when asked, what will the Fed funds rate be after the December meeting? Above 2.75% — 32% chance Above 3.00% — 73% chance Above 3.25% — 64% chance Above 3.50% — 56% chance Above 3.75% — 48% chance Above 4.00% — 15% chance Above 4.50% — 48% chance Above 4.75% — 59% chance Above 5.00% — 53% chance Above 5.25% — 53% chance Market Tracking ETFs: ( DIA ), ( DDM ), ( DOG ), ( DXD ), ( SDOW ), ( SPY ), ( VOO ), ( IVV ), ( RSP ), ( SSO ), ( UPRO ), ( SH ), ( SDS ), ( SPXU ), ( QQQ ), ( QQQM ), ( TQQQ ), ( QID ), and ( SQQQ ). Fixed Income ETFs: ( TLT ), ( TLH ), ( IEF ), ( IEI ), ( SHY ), ( SGOV ), ( SCHO ), ( BIL ), ( AGG ), ( BND ), ( VCIT ), ( MUB ), ( MBB ), ( JNK ), ( LQD ), ( HYG ), ( VTIP ), ( TIP ), ( SCHP ), ( STIP ), ( TIPX ), ( SPIP ), ( WIP ), ( GTIP ), ( LQDI ), and ( RINF ). More on markets US2Y climbs to a 7-month high as the Fed dampens rate cut expectations Recessions are ...