Will the Fed’s lower bound reach 2.5% or lower before 2027?

This market shows extreme asymmetry with a 1144.6% implied yield on the "Yes" side versus just 17.5% on "No," suggesting significant mispricing or genuine conviction that rate cuts to 2.5% are highly unlikely before end-2026. The price has declined sharply from 16¢ to 11¢ over seven days, indicating recent market repricing toward lower probability, though the modest $3,821 daily volume and $23,690 open interest suggest thin liquidity that could amplify moves. With 258 days to expiration and a high cliff risk index of 8, this appears to be a tail-risk bet where the extreme yield compensates for both low probability and potential binary resolution risk around FOMC decisions.

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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