Are Fed Rate Cuts Off the Table for 2026?

• Polymarket prices NO shares at 7% while Yes trades at 93%.
• This market has recorded $8.2M in trading volume, with $12.5K traded in the past 24 hours.
• Liquidity currently stands at $258.0K, representing the available capital across the market.
• The market will resolve on December 31, 2026

Overview

Traders have largely written off the prospect of a Federal Reserve rate cut this year.

On Polymarket, the chance of no cuts in 2026 is now 85%. Only 15% is attached to the alternative, which would require the Fed to lower rates at least once before the end of December.

That view has been building for months. The Fed held its benchmark rate at 3.5% to 3.75% in July, and there are only three scheduled meetings left this year: September, October and December.

The market has recorded $7.3 million in lifetime volume. Trading has been quieter over the past day at $13.4K, while available liquidity stands at $194.6K.

Inflation Leaves Little Room for a Fed Rate Cut

The Fed’s problem is that inflation has eased, but not nearly enough.

Annual CPI slipped from 3.5% in June to 3.4% in July. Core inflation came in lower at 2.5%, but the Fed tends to pay closer attention to the Personal Consumption Expenditures index when setting policy.

That measure is still uncomfortable. Headline PCE inflation stood at 3.7% in June, while core PCE was 3.3%. Both remain some distance from the Fed’s 2% target.

A cut under those conditions would carry a real risk. It could lift demand before price pressures are under control, leaving the Fed with more work to do later.

Energy prices make that calculation harder. The US-Iran conflict has driven oil prices roughly 25% higher, with Brent trading near $89 per barrel on August 17. If those costs begin feeding into fuel, freight and consumer prices, the recent inflation improvement may not last.

Economists broadly agree with the prediction market. A Reuters poll conducted between August 12 and August 17 found that most respondents expect rates to remain at 3.5% to 3.75% through December.

The Jobs Report Complicates the No-Cut Trade

The case for keeping rates unchanged is strong, but it is not settled.

US payrolls fell by 23,000 in July. Job creation has averaged only 34,000 per month over the past year, a sharp loss of momentum compared with earlier periods.

The unemployment rate stayed at 4.1%, which is still low. Even so, the details were weak. Local government education lost 50,000 jobs during July, while retailers cut another 19,000 positions.

Household spending has begun to cool as well. Retail sales fell 0.6% in July, their first monthly decline in nine months. Economists had expected a small increase.

One poor month will not force the Fed’s hand. A run of weak reports might.

A second weak jobs report would change the conversation quickly. July may turn out to be a one-off, but if payrolls fall again in August, the Fed will face growing pressure to respond. Inflation would still be a problem, though letting the labour market slide for several months would bring its own risks.

Holding Rates Looks Like the Easy Choice

The case for another hike has weakened over the past few weeks. Prediction market traders now put the chance of a September increase at 24%, compared with roughly 58% a month ago.

July’s numbers explain the change. The economy lost jobs, shoppers pulled back and inflation eased slightly. None of that points towards an urgent need for higher rates.

It does not point clearly towards a cut either. Inflation is still running above target, unemployment is only 4.1% and the Fed has time to watch a few more reports. Keeping rates at 3.5% to 3.75% would allow officials to avoid committing in either direction.

That is essentially what traders are betting on. Not another hike, not a late rescue cut, just the same rate through December.

The Remaining Fed Meetings

There are three decisions left this year, in September, October and December.

The July PCE report arrives on August 26 and should give a better picture of where inflation is heading. A low reading would help the case for a December cut. If energy prices push the figure higher, traders would have even less reason to expect one.

Jobs data could move the odds more sharply. One bad month is easy to dismiss. Two or three would suggest that the slowdown is no longer limited to a few sectors.

For now, the Fed can afford to wait. Prices are still rising too quickly, but the economy is not weak enough to force an immediate response. That leaves an unchanged rate as the likeliest outcome for the rest of 2026.