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Speculation over the Federal Reserve&#8217;s next interest-rate decisions is heating up, with retail traders betting millions ahead of the central bank&#8217;s<a href="https://www.benzinga.com/news/econ-s"> first meeting of 2025</a>.



Wagers on interest rates have soared in popularity on Kalshi, a CFTC-regulated betting platform, highlighting the growing mainstream appeal of macroeconomic events beyond Wall Street's traditional circles.



Three rate-related markets currently rank among the platform's top 20 most-traded events, underscoring heightened apprehension over what Federal Reserve Chair Jerome Powell and his colleagues will decide next.



<h3 class="wp-block-heading">January Fed Decision A Done Deal: What About March?</h3>



The outcome of Wednesday's Federal Open Market Committee meeting is widely considered a foregone conclusion. 



Futures markets have nearly fully priced in that the Fed will hold rates steady in the current range of 4.25%-4.50%. Betting markets tell the same story, as no analyst within the Street predicts a different move.



According to betting-implied odds, there is a mere 2% chance of a 25-basis-point rate cut on Wednesday, meaning a $1 wager would yield $46.



&#8220;The January FOMC meeting is mostly a placeholder that should see the Fed stay on hold. Markets expect little from the meeting,&#8221; said Bank of America economist Aditya Bhave in a Tuesday note.



Looking ahead to March, uncertainty grows. 



Nearly $25 million has been wagered on where the federal funds rate will stand at the next Fed meeting, with this event ranking as the sixth largest in terms of betting volume on Kalshi.



Betting odds tell there is a 73% chance the Fed will hold rates steady at the 4.25%-4.50% range also in March. In contrast, there is a nearly one-third probability of a cut, offering a $3 payout per dollar wagered.



<iframe loading="lazy" src="https://kalshi.com/external-widgets/events/FED-25MAR?color_scheme=light&#038;widget_size=large&#038;utm_campaign=benzingawidget" width="552px" height="400px" style="border:0" > </iframe>



These bets suggest that policymakers might resist rate cuts through the first quarter of the year, aligning with Powell's previous hawkish stance. 



<a href="https://www.benzinga.com/economics/macro-economic-events/24/12/42563299/feds-powell-shocks-markets-its-a-new-phase-were-significantly-closer-to-neutral">In December, Powell highlighted</a> that interest rates are &#8220;significantly closer to neutral&#8221;, indicating the Fed's careful approach to future cuts. His remarks delivered a sharp recalibration in market expectations, triggering a shift in 2025 rate cut forecasts.



Long-dated Treasury yields witnessed a sharp rise between Dec. 18 and mid-January, triggering a nearly 7% drop in the iShares 20+ Year Treasury Bond ETF TLT before a rebound in recent days on hopes of a softer trade tariff stance from President Donald Trump. 



<h3 class="wp-block-heading">How Many Cuts In 2025? Traders Weigh In</h3>



The CME FedWatch Tool, which tracks rate expectations according to fed funds futures, currently prices in just two rate cuts in 2025, aligning with the Fed's December projections. 



The number of total rate cuts in 2025 has become the 18th most-traded event on Kalshi. As of Jan. 29, the betting market currently predicts:



<figure class="wp-block-table is-style-stripes"><table><thead><tr><th>Scenario</th><th>Probability</th><th>Payout per $10 Wagered</th></tr></thead><tbody><tr><td>Two rate cuts (Base case)</td><td>27%</td><td>$35</td></tr><tr><td>One rate cut (More hawkish)</td><td>20%</td><td>$45</td></tr><tr><td>No rate cuts (Fed fights inflation)</td><td>14%</td><td>$67</td></tr><tr><td>Three rate cuts (Dovish turn)</td><td>18%</td><td>$52</td></tr><tr><td>Four rate cuts (Aggressive easing)</td><td>12%</td><td>$72</td></tr></tbody></table></figure>



<iframe loading="lazy" src="https://kalshi.com/external-widgets/events/KXRATECUTCOUNT-25DEC31?color_scheme=light&#038;widget_size=large&#038;utm_campaign=benzingawidget" width="552px" height="400px" style="border:0" > </iframe>



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Retail traders bet on Fed's 2025 interest-rate decisions, with top markets on CFTC-regulated betting platform. Focus on March for potential cuts.

Interest Rate Speculation Heats Up Before Fed Meeting: What Betting Markets Signal - iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT)

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Interest Rate Speculation Heats Up Before Fed Meeting: What Betting Markets Signal

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