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Posted December 31, 2025 at 11:54 am
ForecastTrader participants are siding with 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 is pricing 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. Meanwhile Wall Street is anticipating around two 25-basis point drops and the Fed’s dot-plot signaled just one.
Year-end economic growth forecasts are pretty depressed in our market, with a 50% chance that the pace of real GDP expansion won’t exceed -0.5% for the fourth quarter. Against that backdrop, there’s a 41% probability 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.
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This material is from IBKR Macroeconomics, an affiliate of Interactive Brokers LLC, and is being posted with its permission. The views expressed in this material are solely those of the author and/or IBKR Macroeconomics and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Interactive Brokers LLC is a CFTC-registered Futures Commission Merchant and a clearing member and affiliate of ForecastEx LLC (“ForecastEx”). ForecastEx is a CFTC-registered Designated Contract Market and Derivatives Clearing Organization. Interactive Brokers LLC provides access to ForecastEx forecast contracts for eligible customers. Interactive Brokers LLC does not make recommendations with respect to any products available on its platform, including those offered by ForecastEx.
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Displayed outcome information is based on current market sentiment from ForecastEx LLC, an affiliate of IB LLC. Current market sentiment for contracts may be viewed at ForecastEx at https://forecasttrader.interactivebrokers.com/en/home.php. Note: Real-time market sentiment updates are only active during exchange open trading hours. Updates to current market sentiment for overnight activity will be reflected at the open on the next trading day. This information is not intended by IBKR as an opinion or likelihood of a potential outcome.
La negociacion de futuros, contratos de eventos y contratos de pronóstico no son adecuados para todos los inversores. Antes de operar con estos productos, por favor lea la divulgación de riesgos de la CFTC. Para una copia visitenos aqui <a href="https://www.interactivebrokers.com/en/general/homepage-disclosures.php
This is commentary on economic, political and/or market conditions within the meaning of CFTC Regulation 1.71, and is not meant provide sufficient information upon which to base a decision to enter into a derivatives transaction.
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