Fed Hikes 25 Basis Points, Projects Another Hike in 2026: Do Prediction Markets Agree?

The Federal Reserve delivered the quarter-point rate hike Wall Street expected Wednesday. But its new projections suggest the Fed isn’t done: 16 of 18 policymakers see at least one more increase this year. The Fed unanimously raised its target rate to 3.75%-4%, its first increase since 2023. Median Projection Implies One More Hike In June, just six of the Fed’s policymakers projected two or more hikes in 2026. After Wednesday’s increase, 16 of 18 see at least one more before year-end, according to Reuters. The median projection puts rates at 4%-4.25% at year-end, implying one more quarter-point hike, before holding at that level through the end of 2027. The Fed also raised its 2026 inflation forecast to 3.7% from 3.6% and GDP growth to 2.3% from 2.2%, while lowering its unemployment estimate to 4.1% from 4.3%. Officials dropped June’s reference to inflation reflecting “supply shocks,” a change Reuters said may signal growing concern about broader price pressures. Oil extended its decline after the Fed decision, with West Texas Intermediate down about 3%. Crude was already under pressure from increased Saudi shipments via Oman and softer U.S. inventory data, and the prospect of higher rates likely added to the selling. Stocks Hold Gains, Yields Slip Before the decision, JPMorgan Chase & Co. (NYSE:JPM) said the S&P 500 could fall 0.25%-1% if the Fed signaled rates would stay higher for longer. The Fed’s new projections pointed in that direction, with most policymakers expecting another hike this year. Stocks nevertheless held their gains. The S&P 500, tracked by SPDR S&P 500 ETF Trust (NYSE:SPY), was up 0.4% after the decision, while the Nasdaq 100, tracked by Invesco QQQ Trust (NASDAQ:QQQ), gained 0.8%. Treasury yields also moved lower. The 10-year yield fell five basis points to 4.96%, while the two-year yield dropped two basis points to 4.64%. The initial reaction suggests investors took the prospect of another hike more calmly than JPMorgan’s higher-for-longer scenario implied. Traders Lean Toward a December Hike Polymarket traders favor a pause in October followed by another increase later this year. The October market prices no change at 64%, and another quarter-point increase at 34%, with about $3.2 million traded. The December market put a quarter-point hike at 67% Wednesday afternoon, up from 57% in Benzinga’s pre-decision preview, with roughly $900,000 traded. Fed Chair Kevin Warsh began his press conference at 2:30 p.m. ET. Investors will be watching whether he reinforces the signal for another hike this year. Image: Shutterstock Read Also: Gas Prices Fuel a Hybrid Boom: Why Can't GM Cash In on It?