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

Prediction markets put the probability at 5%: Will the upper bound of the target federal funds rate be 4.25% at the end of 2026. Currently, markets see this as unlikely (5% 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 its policy rate steady at 3.5% to 3.75% following the April 29, 2026 Federal Open Market Committee (FOMC) meeting, a decision that marked the most divided vote since 1992. The committee split 8-4, with three dissenters objecting to the statement's bias toward future easing and one official voting for an immediate cut. This internal discord comes as the central bank navigates a complex landscape of persistent inflation and slowing growth, with the most recent rate cut occurring in December 2025. The current target range places the upper bound of the target federal funds rate at 3.75%, far below the 4.25% level that market participants are now assigning a 5% probability of seeing by year-end 2026. [Federal Reserve, Apr 29] [CNBC, Apr 29]

The low probability of the upper bound of the target federal funds rate reaching 4.25% by the end of 2026 reflects the market's expectation that the Fed will maintain its current easing bias, despite the hawkish dissent. The April 2026 statement removed explicit forward guidance about the next move being a cut, a change that Minneapolis Fed President Neel Kashkari explicitly supported in his dissent, arguing that "forward guidance is not appropriate" given elevated uncertainty from geopolitical developments. The March 2026 Summary of Economic Projections (SEP) indicated officials foresee only one cut this year, with another in 2027, suggesting the path to 4.25% would require a significant reversal of policy direction—either a series of hikes or a prolonged hold that keeps rates above current levels. [Minneapolis Fed, May 1] [CNBC, May 1]

For the upper bound of the target federal funds rate to reach 4.25% by December 2026, the Fed would need to implement roughly 50 basis points of net tightening from the current 3.75% upper bound—a scenario that appears inconsistent with the majority's current easing bias. Key data points to watch include the April 2026 Consumer Price Index (CPI) release, due May 13, and the next nonfarm payrolls report on May 8. The April 29 FOMC statement noted the committee will "carefully assess incoming data, the evolving outlook, and the balance of risks" before any additional adjustments. Historically, when the Fed has seen this level of internal dissent—last seen in 1992—the subsequent policy path has been characterized by prolonged periods of inaction, with the next rate move taking an average of 6-9 months to materialize. [Traded on Polymarket — $410K Volume

Polymarket prices this at 5c YES with $410K in volume. Moderate liquidity — use limit orders for positions above $1K to avoid moving the price.