Will the upper bound of the target federal funds rate be 3.25% at the end of 2026?

Prediction markets put the probability at 14%: Will the upper bound of the target federal funds rate be 3.25% at the end of 2026. Currently, markets see this as unlikely (14% YES). The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible, and stable monetary and financial system..

What’s Happening

The Federal Reserve held the target range for the federal funds rate steady at 3.5% to 3.75% during its April 29, 2026 meeting, marking the third consecutive pause this year. This decision came amid a deeply divided Federal Open Market Committee, which voted 8-4 in what was likely Chair Jerome Powell's final meeting—the highest level of dissent since 1992. The central bank cited persistent energy-cost driven inflation remaining above the 2% long-term target, alongside uncertainty from tariffs and the ongoing Iran conflict. As a result, the market now assigns only a 14% probability that the upper bound of the target federal funds rate be 3.25% at the end of 2026, reflecting expectations that rates will remain higher for longer. [Federal Reserve, Apr 29] [CNBC, Apr 29]

The 86% probability that the upper bound of the target federal funds rate will remain above 3.25% at the end of 2026 is driven by a combination of sticky inflation and a lackluster job market. The Fed's March 2026 dot plot indicated officials foresee only one rate cut this year, with another in 2027, suggesting the upper bound is unlikely to drop to 3.25% from the current 3.75% level. Energy costs, exacerbated by the Iran war, have pushed overall inflation higher, while the labor market shows signs of weakness without collapsing—a scenario that historically keeps central banks cautious. The last time the Fed cut rates from a similar plateau was in 2019, when the upper bound fell from 2.50% to 2.25% over three meetings, but current conditions of tariff-driven supply shocks make that precedent less applicable. [CBS News, Apr 28] [Forbes, Apr 26]

Looking ahead, the probability that the upper bound of the target federal funds rate be 3.25% at the end of 2026 hinges on upcoming economic data releases, particularly the May Consumer Price Index and the monthly employment reports. The FOMC's statement emphasized it will "carefully assess incoming data, the evolving outlook, and the balance of risks" before any adjustments. With the 10-year Treasury yield hovering near 4.5% and the yield curve remaining inverted, bond markets are pricing in a higher-for-longer rate environment. The next FOMC meeting in June 2026 will be critical, as it will be the first under new leadership and will include updated economic projections. If inflation does not show sustained progress toward 2%, the probability of the upper bound reaching 3.25% by year-end could fall further from its current 14% level. [Builder Magazine, Apr 30] [Federal Reserve, Apr 29]

Traded on Polymarket — $52K Volume

Lower-volume market on Polymarket ($52K). Wider spreads expected — enter with limit orders and be aware of slippage risk. Currently 14c YES.