Will the Fed’s upper bound reach 4.75% or higher before 2027?

The 4¢ price implies only a 4% probability the Fed raises rates to 4.75% or higher by end-2026, despite an extraordinary 3,396% implied yield on the Yes side—a massive risk-reward asymmetry suggesting either severe underpricing or extreme tail risk perception. Volume of just $1,527 against $12.9M open interest indicates thin liquidity that could amplify price swings, and the sharp 6¢-to-4¢ drop over seven days signals recent bearish sentiment, possibly reflecting market confidence in the Fed's current restrictive stance. With 258 days to expiry and a neutral regime, the cliff risk index of 24 suggests moderate concentration of bets near resolution, making this a speculative position rather than a liquid hedge.

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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