Will the upper bound of the target federal funds rate be 4.25% at the end of 2026?

Prediction markets put the probability at 21%: Will the upper bound of the target federal funds rate be 4.25% at the end of 2026. Currently, markets see this as unlikely (21% YES). US Federal Reserve chairman Kevin Warsh arrives for a press conference in Washington, DC, on June 17, 2026.

What’s Happening

The probability that the upper bound of the target federal funds rate will be 4.25% at the end of 2026 stands at 21%, according to current market pricing, with 79% of participants betting against that level. This comes after the Federal Reserve’s June 17, 2026 Federal Open Market Committee (FOMC) meeting, where the committee voted to hold the federal funds rate steady at a range of 3.50% to 3.75%. The decision marked the third consecutive pause following a series of cuts in late 2025, which had lowered the rate from a peak of 4.50%-4.75% to its current level. The FOMC statement noted that "economic activity is expanding at a solid pace despite elevated uncertainty," a shift from earlier language that had emphasized disinflationary progress. [Logistics Management, Jun 18]

A key driver of the market’s skepticism toward the 4.25% upper bound is the sharp hawkish pivot revealed in the latest dot plot. Nine of 18 FOMC participants projected at least one rate hike before the end of 2026, a dramatic reversal from the March 2026 projections, which had shown a median expectation of two quarter-point cuts. The median forecast for the end of 2027 remains unchanged at the current 3.50%-3.75% range, but the near-term outlook has been complicated by the absence of a forecast from new Chairman Kevin Warsh, who abstained from providing his own rate path. Warsh confirmed at the press conference that he refrained from submitting a projection, citing "elevated uncertainty" surrounding the economic outlook. [CNBC, Jun 17]

The hawkish shift is largely attributed to a surge in oil prices following geopolitical tensions in the Middle East, which has eroded confidence that holding rates steady will be sufficient to bring inflation back to the 2% target. Reuters reported that nearly half of policymakers now believe an additional tightening step is necessary, with the upper bound of the target federal funds rate potentially rising to 4.00% or higher if inflation data continues to surprise to the upside. The next FOMC meeting is scheduled for September 2026, and markets will closely watch the August Consumer Price Index (CPI) and nonfarm payrolls reports for signs of persistent price pressures. If the upper bound of the target federal funds rate were to reach 4.25% by year-end, it would represent a 50-basis-point increase from current levels—a scenario that currently carries a one-in-five implied probability. [Reuters, Jun 17]

Traded on Polymarket — $422K Volume

Polymarket prices this at 21c YES with $422K in volume. Moderate liquidity — use limit orders for positions above $1K to avoid moving the price.