Will the Fed increase interest rates by 25 bps after the December 2026 meeting?

Prediction markets put the probability at 28%: Will the Fed increase interest rates by 25 bps after the December 2026 meeting. Currently, markets see this as unlikely (28% YES). Fed projections imply 25 bps of rate cuts in 2026, and another 25 basis points of rate cuts in 2027.

What’s Happening

Money-market pricing for the December 2026 FOMC decision has firmed toward tightening, with the question of whether the Fed increase interest rates by 25 bps after the December meeting now a mainstream house view rather than a tail scenario. On January 12, 2026, J.P. Morgan withdrew its outlook for a January cut and pointed its next-move forecast to a 25-basis-point hike in the third quarter of 2027, while Macquarie reiterated a hike in the fourth quarter of 2026. This marks a sharp reversal from the December 10, 2025 Summary of Economic Projections, in which Fed officials still penciled in 25 bps of cuts in 2026 and another 25 bps in 2027, alongside end-2026 forecasts of 4.4% unemployment and 2.4% headline PCE [Reuters, Jan 12].

Sell-side positioning has since clustered around a hawkish pivot. A February 12, 2026 survey of Wall Street brokerages showed BofA Global Research forecasting 75 bps of hikes across September, October and December to a 4.25%–4.50% terminal, Deutsche Bank at 50 bps (September and December), and both BNP Paribas and J.P. Morgan at a single 25 bps rate hike in December lifting the range to 3.75%–4.00%. That convergence of forecasts on a lone December move is why whether the Fed increase interest rates by 25 bps after the December meeting has become the pivotal calendar event, with disinflation described as "quite gradual" and the labor market expected to tighten [Reuters, Feb 12].

The tightening narrative gained momentum mid-year: by July 13, 2026, CME's FedWatch tool put the odds of a 25-basis-point July hike at 46.5%, with Kalshi at 36%, driven higher as oil prices jumped on the U.S.–Iran conflict. An earlier September 17, 2025 quarter-point cut — the first since December — already exposed a deep FOMC split, with nine of 19 members opposing further easing. Whether the Fed increase interest rates by 25 bps after the December meeting now hinges on incoming CPI, payrolls and energy-driven inflation prints through the fourth quarter [CNBC, Jul 13].

Traded on Polymarket — $57K Volume

Lower-volume market on Polymarket ($57K). Wider spreads expected — enter with limit orders and be aware of slippage risk. Currently 28c YES.