Futures show no patience for early easing, but 2026 bets are growing

Expectations that the US Federal Reserve will continue to implement accommodative policy in January are now at an all-time low.

Both forecasting platforms like Polymarket and futures traders agree that the chances of the Fed cutting rates next month are close to zero.

The CME FedWatch tool, a platform that translates Fed Funds futures into probabilities, now assigns an 84.5% chance of rates remaining stable at 3.50-3.75%. Meanwhile, the better Polymarkt results only give a 12% chance of a cut next month.

However, these expectations should not come as a surprise. Historically, the Fed has refrained from aggressive monetary policy changes at the start of the calendar year. Moreover, this month’s “hawk-like cut,” in which Fed Chairman Jerome Powell warned of persistent inflation pressures even as the committee cut rates has reinforced the view that any easing will be slow and conditional.

Rates could fall more than expected in 2026

The Fed’s official assessment is that the committee is expected to make just one rate cut next year, citing persistent inflation risks and a still-resilient labor market that limit the scope for aggressive easing. Inflation remains above the Fed’s target and is expected to remain so next year:

With a ‘soft landing’ planned for 2028, the Fed’s projections show that inflation will only gradually converge to the 2% target over the longer term. However, the pressure on the labor market may have gone somewhat off course this year.

Still, the Fed is expected to undergo many changes next year. Jerome Powell’s term as Federal Reserve chairman ends in May 2026. President Trump is expected to appoint a new, and much more deaf successor, a move that could reshape the Fed’s policy trajectory just as inflation is expected to cool.

Perhaps for this reason, markets are preparing for more than just one rate cut in 2026. Futures traders are pricing in deeper easing than the Fed itself expects. Contracts for the end of 2026 are closer to 3.1%-3.2%, which, according to the official forecast, implies two cuts rather than a single move.

This shift in expectations is already palpable in the precious metals marketThis could potentially be the first sign that markets expect a cheaper dollar next year.