Will 2 Fed rate hikes happen in 2026?

Prediction markets put the probability at 14%: Will 2 Fed rate hikes happen in 2026. Currently, markets see this as unlikely (14% YES). Key Takeaway In short, yesterday’s ISM report changed the conversation.

What’s Happening

The probability that the Federal Reserve will implement **2 Fed rate hikes happen in 2026** stands at just **14%** as of early August, reflecting a market that has only partially repriced after the **July 29, 2026** ISM manufacturing report showed the strongest reading in four years. That data point, combined with **S&P 500 profit margins hitting a record 16.7%** in Q2 2026, has forced investors to reconsider the baseline assumption that the next Fed move would be a cut. The futures-implied odds for a single hike have climbed to roughly **35%**, but the market still views two separate quarter-point increases as a tail risk scenario, requiring a sustained inflation breakout rather than a single hot month. [24/7 Wall St., Aug 04]

The shift in tone began at the **June 17, 2026** FOMC meeting, where new Chair **Kevin Warsh** presided over a unanimous hold at **3.50%–3.75%**, but the accompanying dot plot revealed a committee split between no cuts and one or more hikes for the remainder of the year. Warsh notably declined to submit his own dot, a signal that the committee’s internal debate is more fluid than the headline numbers suggest. The **U.S.-Iran conflict** has pushed energy prices up roughly **12%** since May, and core CPI has now printed above **3.2%** for three consecutive months, eroding the disinflationary progress that had been expected from housing costs. This is a marked reversal from March, when Oxford Economics’ **Bernard Yaros** projected two cuts in June and September, a forecast that has since been abandoned by most sell-side desks. [Chase, Jun 18]

The key question for the remaining **2026 meetings** (September, October, December) is whether the Fed will treat the war-driven energy shock as transitory or as a second-round inflation effect that warrants preemptive tightening. The **July 29** CBS News survey of economists showed a majority expecting a hold at the July meeting, but **40%** of respondents said an escalation in the Iran conflict would raise the probability of a hike before year-end. Historically, the Fed has never implemented two hikes in a single calendar year after a prolonged pause unless the unemployment rate fell below **3.5%** — the current rate is **3.8%** — which suggests the bar for two hikes remains high. However, with the **10-year Treasury yield** at **4.85%** and the dollar index up **6%** year-to-date, financial conditions have already tightened significantly, reducing the need for aggressive policy action. [CBS News, Jul 29]

Traded on Polymarket — $50K Volume

Lower-volume market on Polymarket ($50K). Wider spreads expected — enter with limit orders and be aware of slippage risk. Currently 14c YES.