The Federal Reserve’s September 16 decision to raise the federal funds target range by 25 basis points to 3.75–4.00 percent, coupled with upward revisions to 2026 PCE inflation projections to 3.7 percent headline and 3.4 percent core, has shifted trader focus away from near-term cuts toward the possibility of additional hikes. Stronger-than-expected labor market data, with unemployment holding at 4.1 percent and solid payroll gains, alongside persistent price pressures from energy and other factors, support the more hawkish median dot plot showing the policy rate at 4.1 percent by year-end. Futures markets now price limited scope for easing before late 2026 or 2027, with the next FOMC meeting and upcoming CPI and employment releases serving as key near-term catalysts that could reinforce or moderate this path.

Sep 17 2026

Strong economic data and Fed hike reduce odds of January 2027 rate cut

January 2027 Meeting plunges to 11%39%

The combination of the Fed's September hike and robust economic indicators led to a steep decline in market pricing for a rate cut at the January 2027 meeting, with contract prices falling from 50% to 11%. This reflects a market consensus that cuts in early 2027 are unlikely.

Sep 17 2026

Markets react to Fed rate hike with sharp decline in rate cut probabilities

December 2026 Meeting dips to 3%4%

Following the September 16 rate hike, market prices for rate cuts at the December 2026 and subsequent meetings dropped sharply, reflecting diminished expectations for easing in the near term. This was evident in the December 2026 meeting contract price falling from 7% to 3% and similar declines in other meetings.

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