Fed Hawks Soar: Zero Rate Cuts in 2026 Becomes Base Case
The probability of no Fed rate cuts in 2026 jumped 12¢ to 81¢ after stronger-than-expected payrolls and hawkish FOMC minutes, overturning earlier expectations of a cutting cycle. The 'Fed rate hike in 2026' market surged to 52¢, now a coin flip.
Key takeaways
- 01
The probability of no Fed rate cuts in 2026 jumped 12¢ to 81¢ after stronger-than-expected payrolls and hawkish FOMC minutes, overturning earlier expectations of a cutting cycle.
- 02
The 'Fed rate hike in 2026' market surged to 52¢, now a coin flip.
- 03
The Federal Reserve repricing has been the dominant macro story this week.
Full analysis
The Federal Reserve repricing has been the dominant macro story this week. The Polymarket contract 'How many Fed rate cuts in 2026?: 0 (0 bps)' surged 12¢ to 81¢, now the consensus view. Meanwhile, the binary 'Fed rate hike in 2026?' contract rose 12¢ to 52¢, implying a 52% chance of at least one hike. This dramatic shift followed the May jobs report that showed 272,000 new payrolls versus expectations of 185,000, and the subsequent FOMC decision that held rates steady but revised the dot plot higher. Traders are now pricing a much tighter monetary environment, with implications for equities, crypto, and commodities. Key contracts to watch: KXFEDDECISION-26JUN- for the June meeting (97¢ no change), KXFEDDECISION-26JUL- for July (90¢ no change), and the year-end rate path 'KXRATECUTCOUNT-26DEC' which shows 74¢ for zero cuts. The 'Fed decision in July?: 25 bps increase' sits at 4¢, but could rise if inflation prints hot.
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