Traders across futures and prediction markets are nearly unanimous: the Federal Reserve is expected to cut interest rates at its September meeting, with a 25 basis point reduction the clear favorite.
CME, Prediction Markets Align on Quarter-Point Fed Cut
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Fed Decision Looms With Markets Bracing for Easing
The next Federal Open Market Committee (FOMC) meeting is set for Sept. 17, now less than two weeks away. The FOMC is the policy-setting body of the Federal Reserve, responsible for guiding monetary policy through interest rate decisions. Eight scheduled meetings are held each year, where officials assess economic conditions and vote on changes to the target range for the federal funds rate.
To gauge expectations, market participants often turn to the CME Fedwatch tool. Operated by CME Group, the tool calculates probabilities for upcoming Fed meetings by analyzing futures contracts tied to the federal funds rate. It offers a real-time view of what traders are pricing into policy outcomes. For September, the Fedwatch tool currently shows an 89% chance of a 25 basis point cut to 4.00%–4.25% on Saturday, Sept. 6, and an 11% chance of a deeper 50 basis point reduction to 3.75%–4.00%.
Prediction markets add another layer of insight. Polymarket, a blockchain-based trading platform, allows participants to wager on event outcomes, including economic and political decisions. While it currently operates internationally, the company has revealed plans to expand into the U.S. soon. Polymarket traders overwhelmingly see a quarter-point cut in September, assigning an 86% chance to that outcome. An 11% probability is placed on a larger 50 basis point move, while just 3% expect no change. Odds of a hike are priced at less than 1%.
Kalshi, another regulated prediction market based in the U.S., offers contracts tied to economic indicators and Federal Reserve decisions too. Kalshi was previously approved by the Commodity Futures Trading Commission (CFTC), giving it a domestic foothold for event-based contracts. Data from Kalshi today shows an 87% probability of a 25 basis point cut, an 11% chance of a larger move, and 4% expecting the Fed to hold rates steady. Bets on a rate hike remain under 1%.
Together, CME futures and prediction market data point to the same conclusion: traders across several platforms expect easing. The near-uniform expectation for a quarter-point cut highlights how strongly investors believe the Fed will move to lower borrowing costs at the upcoming meeting. Still, a slim chance remains for a more aggressive cut, leaving room for market reaction if the central bank surprises.
