Will the U.S. Federal Reserve (FOMC) announce a cut to the federal funds target range at its September 2026 meeting?

probability: 3%

rationale:

The Baseline: A Hike-Leaning Committee

A September 2026 rate cut is an extreme tail-risk scenario, primarily because the live debate within the FOMC is strictly "hold vs. hike." At the July 2026 meeting, the committee held the target range at 3.50%–3.75% by a 9–3 vote. Crucially, all three dissenters—Hammack, Kashkari, and Logan—argued for a 25-basis-point increase 3 sources. To deliver a cut in September, the committee would have to leapfrog directly from an active hike debate, over a hold, to an outright easing of policy within just six weeks, and over the explicit objections of a hawkish bloc.

Projections and Fed Signaling

The June Summary of Economic Projections (SEP) reinforces this hawkish stance. The central tendency for year-end 2026 federal funds rate projections is 3.6%–4.1% federalreserve.gov. Because the midpoint of the current range is 3.625%, this implies the median participant expects rates to end the year at or above the current level, virtually ruling out near-term cuts. Chair Kevin Warsh has emphasized returning to the 2% target, removing forward guidance rather than signaling any incoming easing 2 sources. Other key voices, alongside regional presidents, have signaled readiness to raise rates if inflation remains stubborn reuters.com.

Market Pricing and Consensus

Market pricing assigns almost zero probability to a September cut. Data across prediction markets show the cut leg at around 1% to 2%, with the overwhelming majority of the probability mass split between a hold (~55–63%) and a hike (~37–43%) 3 sources. Futures markets and economist surveys similarly dismiss a cut; a July Reuters poll of 104 economists found none expecting a September cut, and only six expecting any cuts at all in 2026 reuters.com. Even the most dovish major financial institutions project the earliest possible cut in October or December 2 sources.

The Tail Path to Easing

The only credible path to a YES resolution runs through an abrupt and severe deterioration in economic data or an intermeeting financial shock. Recent data did show some labor market softening, with July payrolls falling by 23,000 and unemployment at 4.1% 2 sources. If the August jobs report (due September 4) shows outright contraction and the August CPI undershoots badly, the balance of risks could flip. However, with headline inflation still elevated at 3.4% and core at 2.5% 2 sources, the institutional setup is highly resistant to a sudden pivot. Weighing the rigid hawkish committee structure against the genuine downside risk of the upcoming labor data, a 3% probability accurately captures this narrow tail scenario.