Futures See 78% Chance of Zero Fed Cuts in 2026
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- Futures market now sees a 78.2% chance the Fed makes zero rate cuts in 2026, up from just 5.3% a month ago when two quarter-point cuts were priced in and three cuts were seen as possible.
- Two-year Treasury yields have risen above the effective Fed funds rate, with Bloomberg reporting bond traders are no longer pricing in any Fed cuts this year.
- The war in Iran is the catalyst for the reversal, with Brent crude now roughly 50% higher than before the war began, leaving the Fed without the economic clarity it needs to set monetary policy.
- Fed Chair Powell conceded uncertainty at the press conference following the latest policy statement, saying 'nobody knows' how big the economic effects of the oil shock will be.
- Stock market investors lose the rate-cut tailwind that had been expected for 2026, as the classic 'Don't fight the Fed' dynamic no longer points to a cut-driven rally.
Why it matters: Investors who had been positioning for Fed rate cuts now face a market that has rapidly priced them out — the probability of zero cuts jumped from 5.3% to 78.2% in a single month, driven by a 50% spike in Brent crude. With Powell publicly saying the Fed lacks the clarity to act, the rate-cut tailwind that equities had been counting on for 2026 has effectively evaporated.
