Will the Fed’s lower bound reach 1.75% or lower before 2027?

This market is pricing in an extremely low probability (7%) for the Fed's lower bound hitting 1.75% or below by end-2026, yet the asymmetric implied yields (1,880% for Yes vs. 10.7% for No) suggest significant mispricing or tail risk hedging demand. The zero 24-hour volume combined with $8,258 open interest and a recent sharp price decline from 9¢ to 7¢ indicates thin liquidity and potential difficulty executing positions, raising concerns about the reliability of the current price discovery. With 258 days to expiration and a neutral regime score, the market appears to be underweighting the probability of aggressive Fed cuts if recession risks materialize, though the extreme yield differential warrants caution about whether this reflects genuine market consensus or merely illiquidity.

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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