Prediction Markets Signal Rising Odds of Fed Rate Hike
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- Federal Reserve begins its two-day July meeting on July 28, with a rate decision due at 2 p.m. Eastern on July 29, amid rising market uncertainty about a potential hike.
- Polymarket traders raised the implied odds of a 25-basis-point rate hike to 26.65%, up 9.7 points in 24 hours, while the 'no change' probability fell to 73.25%.
- Myriad showed a nearly identical shift, with the probability of a rate hike rising to 27% and 'no change' dropping to 74% over the past day.
- Fed-funds futures priced in a 37.6% chance of a rate increase as of Monday afternoon, reflecting growing nervousness among professional traders.
- June inflation data cooled to 3.5% from 4.2% in May, offering policymakers room to wait, though the Fed had previously warned inflation remains elevated.
Why it matters: A rate hike would raise borrowing costs and pressure risk assets, but the jump in implied odds—from below 20% to nearly 40% in some markets—shows traders are reacting to mixed signals despite cooling inflation. The Fed’s decision now carries higher volatility risk for markets already pricing in a hold.
