Will the Fed’s lower bound reach 0.5% or lower before 2027?

The market prices an extremely unlikely scenario at just 4¢, implying only a 4% probability that the Fed's lower bound reaches 0.5% or below before end-2026, which aligns with current market expectations of modest rate cuts rather than aggressive easing. The astronomical implied yield of 3,396% on the "Yes" side reflects the massive asymmetry between the tiny premium paid and potential payout, though this is tempered by a 24 Cliff Risk Index suggesting significant tail risk near expiration. With only $157 in 24-hour volume against $17.9M open interest, liquidity is extremely thin relative to position size, creating potential slippage concerns for any meaningful trade.

Resolution rules

The FED interest rates are defined in this market by the lower or the upper bound of the target federal funds range. The decisions on the target federal fund range are made by the Federal Open Market Committee (FOMC) meetings. This market will resolve to “Yes” if the lower or the upper bound of the target federal funds rate reaches the specified level at any point by December 31, 2026, 12:59 PM ET. Otherwise, this market will resolve to “No.” Emergency rate cuts and hikes outside the regularly scheduled meetings will be considered. The resolution source for this market is the official website of the Federal Reserve at: https://www.federalreserve.gov/monetarypolicy/openmarket.htm. This market may resolve as soon as the relevant data showing the reached level is published.

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