Forecast contracts tied to the Fed Funds Target Rate have emerged as some of the most popular across our prediction market. Indeed, there are over 110,000 contracts awaiting this Wednesday’s Fed decision for settlement. While threshold probabilities favor a pause with an elevated degree of confidence, there’s a 6% chance that the central bank will reduce its key interest rate by 25 basis points to a target of 4.125% this week. But if you focus on a maturity date coinciding with the central bank’s meeting approximately six weeks from now on June 18, the odds of landing at 4.125% or lower are much higher at 39%. Investors looking for reductions can focus on the “No” answers across our Fed Funds curve, which extends out to January 2027, while those anticipating pauses or hikes could approach the “Yes” answers.
Source for Images: ForecastEx
Note: Prices are highest bids as of the morning of May 5, 2025.
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I am missing something, because if you buy both contracts, it looks like you’ll come out ahead. What am I missing?