Prediction markets priced a 32 percent probability that the Federal Reserve will raise its benchmark rate by 25 basis points at its December 2027 meeting, following a sharp 45-point decline in the past 24 hours that underscores deepening uncertainty over the timing of the central bank's next tightening move. The contract, which closes on December 8, 2027, still has more than 17 months to absorb incoming inflation, labor-market, and growth data before settlement.
J.P. Morgan Global Research projects the Fed will remain on hold through the remainder of 2026 before delivering its first 25-basis-point hike in September 2027, a forecast that frames December 2027 as a live but not yet consensus call. Minutes from the Federal Open Market Committee's January 28, 2026, meeting show policymakers held the federal funds target range steady at 3.50 to 3.75 percent, while market-based expectations at that time pointed to one or two 25-basis-point cuts during 2026. That divergence highlights the fluidity of longer-run policy expectations.
The Fed cut rates by 25 basis points in both September and October 2025, bringing the target range to 3.75 to 4.00 percent before the January 2026 pause. AIB's December 2024 Fed Watch noted that the FOMC's own projections then implied only about 25 basis points of easing in 2027, illustrating how materially the long-run policy path can shift over time. A December 2027 hike would likely require either persistent inflation reacceleration or a stronger labor market than currently expected, while a slower easing cycle or renewed cuts would push the hike further out or eliminate it altogether.
The 45-point overnight move reflects sharp repricing rather than a settled consensus, with traders weighing the risk that the Fed's wait-and-see posture extends well into 2027. The contract's 17-month horizon leaves ample room for data surprises, and the current 32 percent probability suggests the market views a December 2027 hike as plausible but far from certain.
