Interest Rate Probabilities Have Changed Following Statements from the Fed

Following Federal Reserve Board member Christopher Waller’s statement that he may support keeping interest rates unchanged at the September meeting, market expectations for interest rates continue to shift. In the forecasting market, users are pricing in a 53% probability that the Fed will not change interest rates at its upcoming meeting.

According to Kalshi data, the strongest scenario is a 53% probability that the Fed will maintain its current interest rate at its September 15-16 meeting. A 25 basis point rate hike is priced at 44%.

A more aggressive tightening scenario is seen as highly unlikely in the market. The probability of the Fed raising interest rates by more than 25 basis points is 2 percent, while the probability of a 25 basis point rate cut is only 1 percent.

The fact that trading volume in the prediction market regarding the Fed’s September decision exceeded $34 million also indicates high investor interest in monetary policy expectations.

Market pricing for the remainder of the year suggests that the likelihood of the Fed cutting interest rates in 2026 remains quite limited.

In the market predicting “How many interest rate cuts will there be in 2026?”, 88% of investors expect the year to end without any interest rate cuts. A full one rate cut is priced in with a 10% probability, while two rate cuts are priced in with approximately a 2% probability.

*This is not investment advice.