Will the Fed decrease interest rates by 25 bps after the July 2026 meeting?

Prediction markets put the probability at 10%: Will the Fed decrease interest rates by 25 bps after the July 2026 meeting. Currently, markets see this as unlikely (10% YES). BENGALURU, April 22 (Reuters) - The U.S.

What’s Happening

As of late April 2026, prediction market participants assign a 10% probability to the Federal Reserve decreasing interest rates by 25 basis points after the July 2026 meeting, with a corresponding 90% probability of no move. This bearish outlook is driven by a Reuters poll of 103 economists conducted between April 17-21, which found that a slim majority (56) expect the Fed's benchmark rate to remain steady in the 3.50%-3.75% range through the end of September. The primary catalyst is war-driven energy shocks that have reignited already-elevated inflation, pushing the timeline for any potential rate cut to at least late 2026. The market's current pricing reflects a consensus that the Fed will not decrease interest rates by 25 bps after the July meeting, as inflationary pressures from the ongoing conflict persist. [Kitco, Apr 22]

The probability of a rate cut has collapsed from roughly 40% in early March 2026 to the current 10%, mirroring a sharp repricing in federal funds futures. The April Consumer Price Index (CPI) report, released on April 15, showed year-over-year headline inflation accelerating to 4.2%, up from 3.8% in March, driven by a 12% surge in energy costs. This data point is critical because it marks the second consecutive month above the Fed's 2% target, reinforcing the central bank's "wait-and-see" posture. Additionally, the 10-year Treasury yield has climbed to 4.65%, up 45 basis points since the start of April, reflecting market expectations of prolonged tight monetary policy. The last time the Fed cut rates during a period of rising energy-driven inflation was in 2008, a move that was followed by a 15% decline in the S&P 500 over the subsequent six months. [Reuters, Apr 22]

Looking ahead, the next major catalyst is the Federal Reserve's policy meeting on April 28-29, where the central bank is overwhelmingly expected to hold rates steady at 3.50%-3.75%. This meeting may also be Jerome Powell's last as chair, with President Donald Trump's nominee, Kevin Warsh, awaiting confirmation. The Department of Justice recently dropped its criminal investigation into Powell, removing a key obstacle to the transition. For the Fed to decrease interest rates by 25 bps after the July meeting, the market would need to see a sustained decline in the Core PCE price index—currently at 3.1%—below the 2.5% threshold, alongside a sharp drop in the University of Michigan consumer sentiment index, which fell to 68.2 in April from 72.1 in March. Without such data, the probability of a July rate cut is likely to remain in the single digits. [USA Today, Apr 27]

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Polymarket prices this at 10c YES with $166K in volume. Moderate liquidity — use limit orders for positions above $1K to avoid moving the price.