Will the Fed’s lower bound reach 2.5% or lower before 2027?

What this market is about

The question is tied to the Federal Open Market Committee, which sets the federal funds target range at scheduled meetings and can also act between meetings in unusual circumstances. Here, the market resolves “Yes” if either the lower bound or the upper bound of that target range reaches 2.5% or below by December 31, 2026 at 12:59 PM ET. The resolution source is the Federal Reserve’s official monetary policy page, and the market says it may resolve as soon as the relevant Fed announcement is published.

Why the market exists

There is real uncertainty about how quickly the Fed will be able to cut rates, or whether policy will stay above that threshold through the deadline. Traders and readers may care because the path of the target range reflects the Fed’s view of inflation, growth, and labor-market conditions, and a 2.5% bound would be a notable easing from tighter policy levels. The market is essentially pricing disagreement over whether the Fed will have enough reason to bring rates that low before 2027 begins.

What can move the price

The price can move on any FOMC statement, meeting minutes, or emergency action that changes the target range. A single cut that brings either bound to 2.5% or below would be enough for a “Yes,” while a slower pace of easing, or a pause that leaves the range above that level into late 2026, would support “No.” Because the market uses the official Fed announcement as the source of truth, even an off-schedule rate change would matter if it changes the target range to the stated level.

How to read the current probability