Markets have sharply repriced Federal Reserve expectations, with near-term rate hike probabilities now edging out cuts for the first time since the easing cycle began.
Rate Expectations Shift Sharply as Fed Holds and Markets ReassessThe tracker, which derives probabilities from CME options tied to three-month compounded Secured Overnight Financing Rate (SOFR), shows a growing tilt toward tightening risk. Recent readings place the probability of a 25 basis point hike within three months around 15% to 19.2%, after briefly touching roughly 25% last week.
The updated Summary of Economic Projections hinted at a more divided outlook. While the median forecast still points to one cut in 2026, seven policymakers now expect no cuts at all this year, suggesting growing skepticism inside the Fed itself.
For now, the takeaway is simple: the rate-cut narrative is no longer a given. While a hike remains a secondary outcome, its growing presence in market pricing suggests that 2026 may not unfold as smoothly as earlier forecasts implied.
FAQ What changed in Fed rate expectations? Markets now show slightly higher odds of a rate hike than a cut over the next three months. What do prediction markets say about 2026 cuts? Most traders expect one or no cuts, with zero cuts currently the most likely outcome. Why are hike probabilities increasing? Persistent inflation and rising energy prices tied to geopolitical tensions are driving the shift. Will the Fed raise rates in 2026? A hike remains a lower-probability scenario, but it is no longer off the table.
