Will no Fed rate hikes happen in 2026?

Prediction markets put the probability at 36%: Will no Fed rate hikes happen in 2026. Currently, markets are divided (36% YES, 64% NO). The Federal Reserve held its target federal funds interest rate in the 3.50%-3.75% range at its July meeting, a decision investors generally expected.

What’s Happening

The Federal Reserve has held its target federal funds rate at 3.50% to 3.75% for a third consecutive meeting, with the June 17, 2026 FOMC decision under new Chair Kevin Warsh passing unanimously. However, the accompanying dot plot revealed a significant hawkish shift: more committee members now project rate hikes for later in 2026, a stark reversal from March when no policymakers penciled in an increase and the consensus forecast called for one cut. Warsh notably abstained from submitting his own personal rate projections, leaving markets to interpret the median dots without the chair's anchor. The shift reflects inflation running at its highest level in three years, with officials publicly warning that higher rates may be necessary if price pressures do not abate in the coming months. This backdrop directly informs the market's current 36% probability that no Fed rate hikes happen in 2026, down sharply from the start of the year when a cut was the base case. [Chase, Jun 18] [PBS, Jun 17]

The July 29, 2026 meeting added further pressure, with the Fed again holding rates but facing three dissents favoring a 25-basis-point hike. Investors priced a 35% chance of an increase ahead of that decision, a figure that has since climbed as elevated energy prices feed through to core inflation readings. The number of expected rate increases priced into futures contracts has nearly doubled from roughly 35 in June to 60 in July, according to market data cited by NerdWallet. This repricing matters because the last time the Fed transitioned from a prolonged hold to a hiking cycle—during the 2022-2023 tightening campaign—the first move came after similar inflation persistence, and the subsequent path included multiple consecutive increases. The current 64% market probability that at least one hike occurs in 2026 reflects this historical pattern, though the committee's internal split suggests the decision remains finely balanced. [US Bank, Jul 29] [NerdWallet, Jul 29]

Looking ahead, the key data points that will determine whether no Fed rate hikes happen in 2026 are the August CPI report and the September nonfarm payrolls release, both due before the next FOMC meeting on September 15-16, 2026. The committee's own projections from June showed a median path that includes one hike by year-end, but Warsh's missing dot leaves room for interpretation. The 10-year Treasury yield has already risen to reflect higher policy expectations, and the 2s10s curve has flattened to 18 basis points, a level historically associated with tightening cycles. If inflation prints above the 3.2% year-over-year consensus for July, the probability that no Fed rate hikes happen in 2026 could fall further below the current 36% threshold. Conversely, a sharp cooling in energy prices or a labor market slowdown would support the hold scenario, which remains the modal outcome in the futures market despite the hawkish dots. [Finance, Apr 02] [US

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