Will the Fed’s lower bound reach 0.25% or lower before 2027?

Prediction markets give a 6% probability to: will the fed’s lower bound reach 0.25% or lower before 2027? — # Fed May Not Cut Rates at All in 2026 as Powell Says Inflation Impact of Iran War Remains Unclear.

What’s Happening

Federal Reserve Chair Jerome Powell, in one of his final scheduled public appearances before his term expires in May 2026, stated on Monday that the central bank should look beyond short-term energy price shocks from the ongoing conflict in Iran. Speaking to an economics class at Harvard University, Powell emphasized that the Fed's focus remains on its dual mandate of stable prices and low unemployment, suggesting officials are not currently considering interest rate hikes in response to the oil price volatility. His remarks aimed to soothe market fears that the conflict would force a more aggressive monetary policy stance. [New York Post, Mar 30]

Despite Powell's guidance to look past the energy shock, the geopolitical tension has already impacted financial conditions, sending average 30-year fixed mortgage rates sharply higher to 6.38% last week from a three-year low of 5.98% in February. The Chair acknowledged the war's inflation impact remains unclear, leading some analysts to speculate the Fed may not cut interest rates at all in 2026 as it assesses whether the price pressures are truly transitory. This environment of elevated and uncertain rates contrasts sharply with the near-zero rate policy the Fed employed during the previous economic downturn. [Realtor.com, Mar 30]

The immediate policy path appears to be one of extended caution. Powell reiterated that inflation expectations beyond the short term appear "well anchored," allowing the Fed to maintain its current restrictive stance. With markets anticipating the central bank will be on hold through the end of the year, the discussion has shifted from the timing of cuts to whether they will occur at all in the near future, pushing the possibility of a return to the ultra-low rates of the past further out on the horizon. The central bank's next moves will hinge on incoming data clarifying the persistent versus temporary nature of the current inflationary pressures. [CNBC, Mar 30]

Traded on Polymarket — $118K Volume

Polymarket prices this at 6% YES with $118K in total trading volume.