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TL;DR:
- As the Fed navigates a softening economy, prediction markets sketch a gradual descent into easing policy, balancing growth with cooling pressures to avoid a hard landing
- Early signals point to an initial pivot this month, setting the stage for measured steps that could reshape borrowing costs and spark rallies in duration-sensitive assets
- End of year outlooks reveal a tentative easing rhythm, where incoming data on jobs and prices could either accelerate the path or prompt pauses, testing trader convictions
- Interwoven threads of unemployment trends and inflation guide the Fed's hand
đ Market Snapshots
Rate cuts in 2025
- Number of rate cuts in 2025? (Kalshi)
- How many Fed rate cuts in 2025? (Polymarket)
- Fed decisions in 2025 (Polymarket)
September
October
December
đ Event Breakdown
Fed Interest Rate Decisions Through 2025? Part II: As the FOMC convenes this week amid cooling inflation and softening labor data, prediction markets offer a probabilistic view into the Fed's easing path.
Building on our August analysis, this follow-up dissects evolving odds for September through December decisions, alongside 2025's total cuts, revealing tight interlinks with unemployment and inflation signals.
With unified sentiment across platforms signaling measured dovishness, these insights guide hedging in bonds, FX, and equitiesâquantifying risks from policy pivots in a resilient yet uncertain economy.
Rate cuts in 2025
As traders position for a potentially pivotal year in monetary policy, prediction markets on Kalshi and Polymarket are signaling a consensus around easing, with probabilities coalescing on three cuts overall.
The "Number of rate cuts in 2025" market on Kalshi shows a peak probability of 49% for three cuts, while Polymarket leans slightly more dovish at 52% for three cuts, reflecting bets on persistent inflation pressures or continued labor market softening that could prompt the Fed to act.
Polymarket's "Fed decisions in 2025" market, with its volume distribution slightly skewed toward a pause-cut-cut sequence (23% of the volume) in spite of having only a 2% probability of actually occurring.
The accompanying chart illustrates tight correlations: August unemployment above inversely tracked rate cut expectations, while inflation markets above 3% suggest hawkish pushback.
Fed decision in September
With the FOMC meeting looming, markets are pricing in a near-certain initial cut, but the magnitude remains a key debate for portfolios.
Polymarketâs "Fed decision in September" market assigned 90% to a 25 bps cut and 9% to 50 bps, a shift from earlier volatility as softer payroll data tempered aggressive easing trades.
Kalshi mirrors this closely, with 90% for 25 bps, highlighting unified sentiment on a measured pivot amid cooling inflation.
This signals a potential relief rally in bonds and duration-heavy assets, but with hikes off the table at (<1%), the risk lies in disappointmentâif the Fed maintains current rates (unlikely at 2%), it could spike volatility in FX pairs like USD/JPY.
Revisiting our August analysis, odds have firmed from scattered distributions. Traders might consider calibrating straddles around the dot plot release, using these probabilities to inform carry trades or hedge emerging market exposures vulnerable to a stronger dollar.
Fed decision in October
October's outlook builds on September's momentum, with markets anticipating follow-through easing if incoming data validates a soft landing.
On Kalshi, probabilities favor a 25 bps cut at (68%), with pause odds dipping to 21% as traders bet on sequential policy normalization. Polymarket shows similar alignment but with higher volatility in >50 bps scenarios at 10%, possibly reflecting sensitivity to interim CPI prints.
Compared to late August, current signals suggest a dovish tilt. Implications are stark: a surprise pause could flatten the curve, pressuring bank net interest margins and prompting shorts in financials.
Traders might exploit divergences between platforms for arb plays, while integrating these odds into multi-asset models to navigate potential Fed forward guidance shifts that ripple into commodities and emergin market debt.
Fed decision in December
By December, cumulative easing paths come into sharper focus, with year-end markets pricing a likely pause or modest cut to cap 2025's trajectory.
Kalshi pegs a 25 bps cut at 60%, while no-change probabilities stand at 32%. Similarly, Polymarket prices a 25 bps cut at 60% with a 31% chance of no cut in December. Markets evolved from August's more hawkish baseline as labor indicators softened.
This setup favors barbell strategiesâlong front-end Treasuries for cut protection, paired with equity puts if pauses signal over tightening.
Risks include fiscal cliff scenarios amplifying volatility, where these markets offer early warnings for currency interventions or credit spread wideners.
Updating our prior coverage, the converged odds across platforms underscore reliable signals for portfolio rebalancing.
* * *
In aggregate, these markets paint a cohesive narrative of gradual Fed easingâ52% of three total cuts in 2025, anchored by a probable September start and incremental steps through year-end.
As FOMC outcomes unfold, Adjacent's real-time snapshots equip you to navigate the InfoFi edge, turning probabilistic foresight into resilient strategies across assets. Stay tuned for post-meeting updates.
Related markets & forecasts:
- How many dissent at the next Fed meeting?
- Who will Trump nominate as Fed Chair?
- Who will Trump announce as next Fed Chair in 2025?
- Powell out as Chair?
- Next Fed rate hike?
- Will the Fed do a rate cut of more than 25bps this year?
- Number of emergency rate cuts this year?
- Will the Fed have an emergency meeting in 2025?
- FED dot plot median up next meeting?
âQuestions we asked
Follow the Adjacent community on Metaculus here!
- Will the yield on 10-year U.S. Treasury notes exceed 5% for at least one month in 2025?
- U.S. real GDP growth in 2025?
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