Markets Bet on Multiple 2026 Rate Cuts Even as Fed Signals Only One

A widening gap has emerged between the Federal Reserve and financial markets over US interest rate expectations for 2026, Beincrypto reports. Markets are pricing in two to three rate cuts for the year, while the Fed’s official guidance points to just one reduction. Prediction platform Polymarket assigns a 12% chance of a rate cut at the January FOMC meeting, rising to 81% by April and 94% by June; for 2026 a two-cut scenario holds the highest single probability at 24%, three cuts 20% and four cuts 17%, with two-or-more cuts exceeding 87%.

The CME FedWatch tool shows similar odds, and Fed internal signals differ: the December FOMC cut 25 basis points to a 3.5–3.75% target range in a 9–3 vote, the dot plot’s median points to one cut in 2026, and Philadelphia Fed President Anna Paulson said “some modest further adjustments…would likely be appropriate later in the year,” calling policy “still a little restrictive.” Markets blame President Donald Trump’s push for lower rates and the prospect that he will appoint Powell’s successor in 2026 for the disconnect, noting a Trump-aligned official pushed for a 50-basis-point cut in December.

At the same time, rising prices are eroding Trump’s political standing: his approval on economic policy is reported at 36%, polls show 57% disapprove of his economic management, about half say their finances have worsened, and food and other consumer prices have risen sharply.

Key Topics

Business, Federal Reserve, Donald Trump, Polymarket, Cme Fedwatch, Anna Paulson