Fed September 2026 Rate Cut Probability
May 5, 2026
The market is pricing an extremely low probability of a 25bp cut at the September 2026 FOMC meeting, with ZQ futures implying only a 4.3% chance based on the 25bp-step framework.
Key takeaways
- ZQ futures pricing 95.7% hold probability for September 1. The CME FedWatch model implies a 3.63% post-meeting rate (only +1.1bp move from current 3.625% mid), placing the probability of a 25bp cut at approximately 4.3%.
- Broader 2026 no-cut consensus 23. Prediction markets are pricing 58.6% probability for zero Fed cuts across all of 2026, with Kalshi showing 56.6% on exactly zero cuts. This context makes a September-specific cut even less likely than the market's current narrow window for any cuts.
- June and July meetings show near-zero cut odds 2. The June 2026 meeting has only 2.5-3.0% implied cut probability, and July is at 11.5% (i.e., 88.5% hold). The trajectory across the spring-to-fall sequence shows holding as the dominant expectation.
- Cumulative path implies policy hold or slight hike 1. Across five meetings through December 2026, ZQ futures price only +11.2bp cumulative move (roughly zero 25bp cuts), suggesting the Fed stays in hold mode or considers rate increases by year-end.
Signal table
| Signal | Value | Horizon | Note |
|---|---|---|---|
| ZQ Sep 2026 post-meeting implied rate 1 | 3.63% | 2026-09-16 | P(hold) = 95.7% under 25bp-step model |
| Polymarket: no cuts in 2026 2 | 58.6% | 2026-12-31 | Highest probability outcome for full year |
| Kalshi: exactly 0 cuts in 2026 3 | 56.6% | 2027-01-01 | Aligns with Polymarket consensus |
| Kalshi: exactly 1 cut in 2026 3 | 18.5% | 2027-01-01 | Second-most likely scenario |
| Polymarket: Jun 2026 cut 2 | 2.5% | 2026-06-17 | Near-zero near-term cut expectations |
| Polymarket: no change Jul 2026 2 | 88.5% | 2026-07-29 | Hold is dominant expectation through summer |
Cross-check
ZQ futures and prediction markets align on the hold baseline: CME's 95.7% September hold probability translates to roughly 4-5% residual probability mass split between cuts and hikes, consistent with Polymarket and Kalshi framing zero cuts as the dominant 2026 outcome (56-59% combined). The September meeting sits in the middle of a broader holding cycle that extends from June through year-end, with no market-implied pressure for easing.
Caveats
- ZQ liquidity weakens beyond the June meeting (liquidity_score 0.7 for Sep and Oct vs. 1.0 for Jun), so forward FOMC prices carry wider bid-ask spreads and may reflect thinner positioning.
- Prediction markets (Kalshi and Polymarket) aggregate full-year cut counts; they do not isolate September-specific probabilities, so the 4.3% verdict is derived from ZQ futures framework, not direct market pricing of a "Sep cut" binary contract.
References
Model-derived probabilities anchored to current data; not investment advice. Past base rates and current market-implied probabilities do not guarantee future outcomes.