- Markets assign 96% odds to no rate change, defying political pressure for cuts.
- Prediction and futures markets align, showing low confidence in imminent easing.
- Stable crypto prices and $2.9M in bets reflect trust in Fed’s cautious approach.
As the Federal Reserve’s July meeting approaches, markets overwhelmingly expect interest rates to remain unchanged. On prediction platform Polymarket, users assign a 96% probability to the Fed holding rates steady this Wednesday.
This firm outlook contrasts sharply with recent claims by Donald Trump, who argues the central bank is preparing to loosen monetary policy. Despite mounting political calls for rate cuts, traders remain focused on the Fed’s data-driven approach, which signals no immediate move toward easing.
Market Signals Indicate Caution Over Cuts
While Trump pushes for lower rates to boost growth, futures and prediction markets suggest otherwise. The CME FedWatch tool places the likelihood of a rate cut at just 2.1%.
Although slightly higher than Polymarket’s estimate, it still indicates broad skepticism about imminent action. Significantly, this divide illustrates how prediction markets often incorporate crowd sentiment more directly than traditional tools.
Moreover, recent trends in inflation and employment data continue to shape expectations. Traders interpret the Fed’s consistent emphasis on being data-dependent as a sign of caution. Inflation, although cooling, remains above the central bank’s target. Consequently, the Fed is unlikely to risk reigniting price pressures by cutting rates prematurely.
Broader Market Stability Reinforces Expectations
Financial markets have shown minimal volatility leading into the meeting. Cryptocurrencies like Ethereum (ETH), Polygon (MATIC), and USD Coin (USDC) have all remained stable. This quiet behavior mirrors the market’s confidence in a rate hold and reflects the broader consensus that no drastic policy moves are coming.
Additionally, over $2.9 million in trades on Polymarket’s Fed contracts reflect high conviction in the current trajectory. This volume, while not determinative, highlights how investors are positioning based on the Fed’s recent tone. Chair Jerome Powell and other officials have repeatedly indicated that any shifts in policy would depend on clear economic signals.
The labor market remains strong, adding complexity to the Fed’s choices. Hence, even with political pressure to support growth through lower rates, the central bank appears committed to maintaining credibility. Maintaining independence is key, especially in a pre-election climate where external influences loom large.
