The Federal Reserve delivered exactly what markets expected yesterday: a 25 basis point rate cut, bringing the federal funds rate down as the central bank continues its pivot toward monetary easing

The Polymarket for yesterday's Fed decision shattered records, surpassing $200 million in trading volume to become the largest FOMC prediction market in history.

Markets Immediately Price in October's Move

Within moments of the announcement, prediction markets shifted their focus to the next FOMC meeting. The consensus emerged swiftly and decisively: another 25 basis point cut is coming in October.

Across multiple platforms, the probability of an October cut surged to remarkably consistent levels:

• Polymarket: 80% probability for a 25bps decrease

• Kalshi: 80% probability, matching Polymarket's assessment

• CME FedWatch: Slightly more bullish at 87% probability

This alignment across different prediction markets suggests strong conviction among traders that the Fed's easing cycle has momentum. With only two more FOMC meetings remaining this year (October and December), the market is essentially betting on continued accommodation through year-end.

The 75 Basis Point Consensus for 2025

Looking beyond October, Polymarket users are coalescing around a specific scenario for the full year ahead. A commanding 65% of participants expect three total rate cuts in 2025, amounting to 75 basis points of easing, while 23% anticipate a more modest two cuts totaling 50 basis points.

The Fed's meeting schedule for 2025 (January, March, and April) before Powell's term expires in May 2026 adds another layer of complexity to these predictions. Markets are essentially betting that Powell will continue his current trajectory through his remaining tenure.

What Did Powell say during September Press Conference?

Overall, Powell acknowledged growing pressure on the U.S. economy and labor market, leaving the door open for potential rate cuts while warning that excessive easing could deepen an economic slowdown.

While Powell stopped short of declaring a recession, he pointed to increasing downside risks and suggested the U.S. may be entering stagflationary territory.

Addressing divisions within the Fed, Powell attributed differing views on rate cuts to how individual policymakers interpret current market and labor conditions. He emphasized that while the situation hasn't reached crisis levels, mounting downside risks require containment, making rate cuts a necessary consideration for many officials.

But beyond the policy implications, Powell's press conference became an unexpected phenomenon in the prediction markets.

Here's where things get absurd and surprisingly insightful. Polymarket didn't just bet on what Powell would decide; they bet on what words he would say. With over $1 million in volume on this prediction markets, traders literally counted every words from the Fed Chair's mouth.

The Fun Facts:

Markets that resolved YES

✅ "Inflation" 40+ times

✅ "Goal" 15+ times

✅ "Unemployment/Employment" 20+ times

✅ "Good afternoon"

✅ "AI"

✅ "Median"

✅ "Pandemic"

✅ "Probability"

Markets that resolved NO

❌ "Tariff" 15+ times

❌ "Anchored" 3+ times

❌ "Trump"

❌ "Recession"

❌ "Downbeat"

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