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Traders are pricing a 60% probability of a Federal Reserve rate cut by December 2026 on Polymarket’s Fed rate decision market, with the current rate holding at 3.5%-3.75% as the U.S.-Iran conflict disrupts global oil supplies and complicates Fed policy.
Market reaction
The December 31 sub-market now carries a 60% chance of a rate cut, up from earlier in the year when two cuts were anticipated. The April 30 and June 18 sub-markets have not moved much, with decisions still 14 and 63 days away, respectively. Trading volume in the Fed rate decision market remains thin, with no recent 24-hour volume reported. No large single trades have been specified, pointing to a lack of aggressive positioning.
Why it matters
The market has reversed from pricing a 53% probability of rate hikes after the war’s onset to now favoring cuts. The oil shock from the Strait of Hormuz closure has sharpened expectations around inflation and economic slowdown, pushing traders toward more dovish Fed scenarios. At 60¢, a YES share pays $1 if a rate cut occurs by December, a potential 1.66x return. Without explicit dovish guidance from the Fed, these probabilities may be overstated relative to actual policy signals.
What to watch
Powell’s statements and FOMC meeting minutes are the most direct catalysts for repricing. Employment and inflation data releases over the next few months will also shape whether the market’s current lean toward cuts holds up or corrects.
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