Will the Fed’s lower bound reach 1.5% or lower before 2027?

This market shows extreme mispricing with a 1,880% implied yield on the "Yes" side versus just 10.6% on "No," suggesting severe underpricing of the 1.5% lower bound scenario given current Fed policy trajectory. The zero 24-hour volume combined with $8.4M open interest and a tight 1¢ spread indicates illiquidity despite substantial capital deployed, creating potential execution challenges. With 258 days to expiry and the Fed currently holding rates in the 4.25-4.5% range, the market is pricing in less than 7% probability of reaching 1.5% or lower—a scenario that would require roughly 275 basis points of cuts, which appears underweighted relative to historical recession-driven easing cycles.

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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