The Federal Reserve held interest rates steady at its January meeting, but prediction markets feel there could be cuts coming later in the year.
The Fed's decision to pause its cutting cycle after three quarter-point reductions late last year left the federal funds rate unchanged in a range of 3.0-3.25%. Chair Jerome Powell struck a more optimistic tone on the labor market, with the central bank noting that "economic activity has been expanding at a solid pace" and unemployment "has shown some signs of stabilization."
Kalshi traders are pricing in a cautious outlook for 2026 rate policy, with only 13% odds of zero cuts and a 15% probability of just one cut.
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Number of Rate Cuts in 2026
The January meeting occurred amid heightened political pressure, with President Trump's ongoing criticism of Fed independence and a Supreme Court case regarding his ability to fire Fed Governor Lisa Cook. Two voting members dissented in favor of another quarter-point cut: Stephen Miran, continuing his streak of dovish dissents, and Christopher Waller, considered a potential candidate to replace Powell when his term ends in May.
The prediction market data reveals traders expect a measured approach to rate cuts, with the highest probability concentrated around 2-3 total cuts for the year. This aligns with the Fed's apparent shift toward a more patient stance as economic indicators show resilience, despite earlier concerns that prompted the late-2025 cutting cycle.
Powell faces the challenge of navigating monetary policy while addressing a DOJ investigation into his congressional testimony regarding Fed headquarters renovations, adding another layer of complexity to an already politically charged environment.
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Different than a traditional sportsbook and available in most states, Kalshi allows users to make predictions across several unique markets, including sports, entertainment, elections and even weather.
Kalshi operates on a contract-based system where users buy "contracts" (priced between 1–99 cents) based on whether they believe a specific event will happen. The price of each contract fluctuates in real time based on market sentiment and like the stock market, traders can sell positions early to lock in profits (or minimize losses).
