ForecastTrader participants are siding with US monetary policy doves as we flip the calendar in the sense that they are projecting more 2026 Fed cuts than both Wall Street and the central bank envision. Indeed, our market on Dec. 31 priced in three reductions next year to land the rate from its current mid-point level of 3.625% to 2.875%. The December 2026 contract at 2.875% prices a 44% probability that the benchmark will exceed that threshold, and a 54% chance that it won’t. As of Dec. 31, Wall Street anticipating around two 25-basis point drops and the Fed’s dot-plot signaled just one.
Why Are Forecasters So Dovish?
Year-end economic growth forecasts are pretty depressed in our market, with a 50% chance on Wednesday that the pace of real GDP expansion won’t exceed -0.5% for the fourth quarter as of Wednesday, Dec. 31. Against that backdrop, there was a 41% probability on Wednesday of a technical recession occurring by the culmination of 2026. It’s precisely weak economic performance expectations that have forecasters considering whether the Fed will need to respond to a sluggish landscape via more rate cuts than Wall Street and the central bank itself projects.
Source for images: ForecastEx
Note: Prices are highest bids as of the morning of Dec. 31, 2025. Time to expiration is also as of Dec. 31, 2025
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