What will the Fed rate be at the end of 2026 Odds & Analysis
What the market is pricing: one more hike, and the December meeting decides it
What will the federal funds rate be at the end of 2026? As of late October 2026, prediction markets put 4.25% far in front at 69%, with 4.0% at about 19% and 4.5% or higher at about 8.5%. Every bucket at 3.75% or below trades near 1% or less. The Fed raised its target range to 3.75%-4.00% on September 16, so the 4.0% bucket now means no further move, and 4.25% means exactly one more quarter-point hike before the market resolves on the statement from the December 8-9 FOMC meeting. PredMart lists this market for traders who want leveraged exposure to that single question.
The board looks very different from June, when 4.0% led at 35.5% and 3.75% sat at 29.6%. Since then the Fed held in July with three hawkish dissents, hiked in September, and spent October signalling patience. The probability mass that used to cluster around 3.75% has moved up a full bucket, and the live debate is no longer whether the Fed tightens this year but whether its second hike lands in December or slips into 2027.
The market resolves on the upper bound of the target range, rounded to the nearest 25 basis points, using official Federal Reserve information. With about 7.1 million USDC traded on the event, the rate-bucket structure gives a full distribution rather than a yes-or-no answer: when one bucket loses probability, it has to show up in a neighbor, and the past month shows exactly where it went.
How the board got here: July dissents, a September hike, an October pause
At the July 28-29 meeting the Fed held at 3.50%-3.75% on a 9-3 vote. Cleveland's Beth Hammack, Minneapolis's Neel Kashkari and Dallas's Lorie Logan dissented in favor of a hike, according to Reuters and Washington Examiner coverage on July 29. Warsh called the pause prudent and pointed to a large majority behind it, while the 30-year Treasury yield climbed to roughly 5.23%, its highest in 19 years.
On September 16 the committee moved, raising the range by 25 basis points to 3.75%-4.00% on a unanimous vote, the first increase since July 2023. The updated projections lifted 2026 headline PCE inflation to 3.7% and core PCE to 3.4%. InvestingLive's breakdown of the dot plot that day showed 12 of 18 participants expecting two hikes in total for 2026, four expecting three, and two seeing September as the only one needed. The median therefore pointed to an upper bound of 4.25% by December.
The September CPI report on October 14 kept that path alive. American Banker reported headline inflation at 3.7% year over year, above the 3.6% consensus and up from 3.4% in August, with gasoline doing much of the work and core CPI at 2.6%. Fed speakers split in the same coverage: Logan argued rates need to rise an additional 50 basis points or more, while New York Fed President John Williams said there was no need for urgency and Vice Chair for Supervision Michelle Bowman said she did not see an urgent need for further action.
Two days later, at the IMF meetings, Warsh said the Fed had tightened somewhat a month earlier and would not prejudge future decisions. Bloomberg reported on October 16 that futures-implied odds of an October hike fell below 15% from about 27% after the remarks, and Goldman Sachs said it expects the Fed to skip October and deliver its final hike of the year in December. That sequence explains the current board: an October hold is close to consensus, and almost everything rides on December.
The front-runner: 4.25% at 69% is the "one more hike" consensus
The 4.25% contract has gained roughly 20 points over the past month and now holds 69% of the probability. It is the bucket that matches the September median dot, the Goldman Sachs call, and the separate December decision market, where a 25 basis point hike trades at 76.5% against 19.5% for no change. The October decision market, by contrast, prices a hold at 94.5% and a hike at only 4.5%, so the 4.25% thesis is almost entirely a December thesis.
The case is straightforward. Headline CPI at 3.7% is nearly double the Fed's 2% target and moved the wrong way in September. The committee's own projections already embed a second hike, and most participants signed up for it. Skipping October lets the Fed avoid a move days before the November 3 midterms while still delivering the tightening it projected, alongside fresh projections at the December meeting.
The weak point is that 69% leaves no room on either side. This bucket wins only if the Fed hikes exactly once between now and the December statement. A December hold sends the payout to 4.0%; a surprise October hike followed by another in December, or a 50 basis point move, sends it to 4.5% or higher. The gap between the 76.5% December-hike price and the 69% bucket price is a useful gauge of how much the market still assigns to those two-move paths.
The challenger: 4.0% at 19% is the "September was enough" bet
The 4.0% contract is the biggest riser of the past week, up about 7 points, and roughly 12 points over the month. It pays if the current 3.75%-4.00% range survives both remaining meetings. Its case rests on reporting from the past two weeks: core CPI at 2.6% is far calmer than the headline, Williams and Bowman both rejected urgency, Warsh declined to commit to any path, and two dot-plot participants already saw September as the last hike. Long-dated yields that hit 19-year highs in July have done some of the tightening the Fed would otherwise do.
The two front buckets together hold close to 90% of the probability, so the trade that matters is the split between them rather than the level. That split moves on every data release, not only on decision day: a hot October CPI pushes mass from 4.0% to 4.25%, while a soft one or a weak jobs report does the reverse.
The risk for 4.0% holders is that the Fed's guidance has been consistent since September. A hold in December would require the committee to walk away from a projection most of its members made three months earlier, which usually takes a clear run of softer inflation or labor data.
The tails: 4.5% or higher, and everything below 4.0%
The 4.5%-or-higher bucket is the biggest loser of the month. It now trades around 8.5%, down roughly 33 points from about 41% a month ago, when American Banker reported futures pricing an October hike near 70% (as of September 28). Warsh's October remarks and the skip-October consensus removed most of the path to two more hikes in two meetings. What remains is the four dot-plot participants who projected three hikes for 2026, Logan's public case for 50 basis points or more, and energy risk: Kiplinger's economist expects annual CPI to end the year near 4%, citing Middle East energy costs. The December decision market prices a 50 basis point hike at only 2.65%, so this bucket mostly needs an October surprise.
Below 4.0% the board is effectively closed. The 3.75% bucket trades at about 1%, 3.5% at about 1.25%, and every lower bucket at 0.5% or less. Each of these requires the Fed to reverse its September hike and cut before December, which no Fed speaker has floated in recent coverage. They function as insurance against an abrupt shock rather than as a live forecast.
Leverage cuts both ways on contracts this thin: a bucket priced near 1% or 8% can move several points on one headline, and a leveraged position on the wrong side of that move loses proportionally faster than the move itself.
Catalysts: the dated events that will reprice the board
Six weeks remain before resolution, and the calendar is short and specific.
The October 27-28 FOMC meeting comes first, with the decision on Wednesday, October 28. The October decision market prices a hold at 94.5%, so the rate itself is unlikely to move the year-end board. The statement language on further firming, Warsh's press conference and the vote count matter more. A separate market on October dissents is spread wide, with two dissents at 29%, none at 26.5% and three at 19.5%, which reflects real uncertainty over whether the July hawks break ranks again. A hold with several hike dissents would support 4.25% and the 4.5% tail; a unanimous hold with softer language would help 4.0%. There are no new projections at this meeting.
November 3 brings the midterm elections. The vote does not change the Fed's mandate, but it removes the timing argument that has been used to explain an October skip, and the fiscal outlook that follows can shift inflation expectations.
Friday, November 6 brings the October jobs report, and Tuesday, November 10 brings October CPI, the last inflation print the committee sees before December, per the Bureau of Labor Statistics release calendar. After September's 3.7% headline, a second hot reading would make a December hike close to certain in the market's eyes; a clear cool-down is the main path for 4.0%. Minutes from the October meeting follow about three weeks after the decision, around November 18, and will show how many participants still favor another move.
The November jobs report lands on Friday, December 4, and then the December 8-9 FOMC meeting resolves the market, with a fresh dot plot alongside the decision. Note that November CPI is not released until December 10, after the statement, so it plays no role in this market.
Bottom line: December hike is the base case, the 4.0% split is the swing
The board has repriced a full bucket higher since June. With the Fed at 3.75%-4.00% after its September hike, a 9-3 hawkish dissent in July behind it, and headline CPI running at 3.7%, prediction markets give 69% to a final December hike that takes the upper bound to 4.25%. The October meeting is priced as a near-certain hold, which shifts almost all of the remaining uncertainty to two data releases in early November and to the December statement itself.
The live contest is between 4.25% and 4.0%, roughly 69% against 19%. The case for 4.25% is the Fed's own dot plot and an inflation rate moving the wrong way; the case for 4.0% is calmer core inflation, patient comments from Williams and Bowman, and Warsh's refusal to pre-commit. The 4.5%-or-higher tail has lost most of its support since late September, and every outcome at 3.75% or below would need a reversal that nobody at the Fed is discussing.
For anyone taking a leveraged view on that split, the October 28 statement and the November 10 CPI print are the dates where the gap between the two front buckets is most likely to move.
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