Will the Fed’s lower bound reach 2.0% or lower before 2027?

This market is pricing in an extremely low probability (9%) for the Fed's lower bound hitting 2.0% or below by end-2026, implying the market expects rates to remain elevated, yet the asymmetric implied yields (1431% for Yes vs. 14% for No) suggest severe mispricing or illiquidity concerns. With zero 24-hour volume, $8,062 open interest, and a wide 5¢ spread on a binary contract, the market lacks sufficient liquidity to trust the 9¢ price as reliable—the extreme realized volatility of 2032% and cliff risk index of 10 indicate this is a thin, unstable market prone to sharp moves on minimal information flow.

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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