Strong economic data has dramatically lowered trader expectations for a Federal Reserve rate cut in April 2026. The probability for a 25 basis point reduction following the April meeting now stands at just 0.4%, down from 1% last week. Fed nominee Kevin Warsh's upcoming testimony is also a key factor to watch.
In prediction markets, the odds for an April rate cut have nearly evaporated. The likelihood of a 25 bps cut is at 0.4%, with 50+ bps at 0.1%. While daily face value trades are high, actual USDC volume indicates where real money is being allocated.
The market for 'no rate cuts happening in 2026' has also shifted, with traders increasingly betting against cuts this year, influenced by robust economic indicators. This sentiment reflects a sensitivity to even minor economic data changes.
At current market prices, a 'yes' share for a 25 bps cut offers a small potential return, requiring significant conviction in an economic reversal to justify the investment. Warsh's testimony could provide clarity on the Fed's intentions, but without dovish signals, rate cut expectations are likely to remain subdued.