Will the upper bound of the target federal funds rate be 3.75% at the end of 2026?

As of September 1, 2026, Polymarket prices “Will the upper bound of the target federal funds rate be 3.75% at the end of 2026?” at 6% YES with $535K traded. No tracked wallet holds a position on this market, so there is no verdict.

Prediction markets put the probability at 25%: Will the upper bound of the target federal funds rate be 3.75% at the end of 2026. Currently, markets see this as unlikely (25% YES).

What’s Happening

The upper bound of the target federal funds rate has remained pinned at 3.75% since the Federal Open Market Committee’s December 10, 2025 meeting, with every scheduled 2026 policy session—including June 17—ending in a hold. This prolonged pause follows an easing cycle that concluded late last year, leaving the target range at 3.50% to 3.75%. The market now assigns a 25% probability that the upper bound of the target federal funds rate will still be 3.75% at the end of 2026, implying a roughly three-in-four chance of at least one quarter-point hike before the December 8-9 FOMC meeting. That single formal move would resolve the contract to “Yes,” as any increase above the current ceiling triggers the outcome [Cryptoslate, Jul 14].

Inflation data has hardened the case for tightening. Core PCE ran at 3.3% year-over-year in July 2026, while headline PCE sat at 3.7%, with services inflation holding at 3.7% and energy prices up 15.3% from a year earlier. The 10-year Treasury yield reached 4.67% on August 27, near the top of its trailing-year range, while real average hourly earnings remained roughly flat at $11.30. These readings have kept the upper bound of the target federal funds rate at 3.75% under pressure, as tariff-driven price increases and AI-related productivity shifts complicate the Fed’s reaction function. Bloomberg Economics forecasts the upper bound of the target federal funds rate will remain at 3.75% through end-2026, but traders are pricing a 20% chance of a second hike by year-end [Economic Times, Jul 6].

Fed Chair Kevin Warsh has signaled that AI may become a fourth factor of production, reshaping how the committee views neutral rates and supply-side capacity. At the September 15-16 FOMC meeting, the committee will face a stark choice: hold again and risk falling behind on inflation, or hike and acknowledge that the 3.75% upper bound was not the terminal rate. The October 27-28 session offers another window before the final December 8-9 decision. Real GDP growth of just 1.5% in the quarter ending April 1, 2026, sits below the Fed’s healthy 2-3% range, creating a stagflationary backdrop. The last time the Fed held rates for seven consecutive meetings, in 2006, it ultimately resumed hiking—a historical precedent that now weighs on the 25% probability that the upper bound of the target federal funds rate ends 2026 unchanged [247wallst, Aug 28].

Traded on Polymarket — $535K Volume