Background

The Federal Reserve's December 2023 "dot plot" forecast indicates expectations for approximately two rate cuts in 2025, totaling a 50 basis point reduction. This follows a period of aggressive rate hikes aimed at combating inflation. The Fed's current target rate range is 5.25-5.50%.

Resolution Criteria

This market will resolve based on the net number of Federal Funds Rate target range adjustments made by the Federal Open Market Committee (FOMC) during calendar year 2025. The resolution will be determined by comparing the target range at the end of 2025 to the target range at the start of 2025.

• If the Fed implements both cuts and hikes during the year, they will offset each other (e.g., two cuts and one hike would count as one net cut)

• Resolution will be based on the official Federal Funds Rate target range as published by the Federal Reserve

• Changes will be counted based on when they take effect, not when they are announced

• If the Fed implements multiple rate changes at a single meeting, they will be counted as separate cuts/hikes

Considerations

• The Fed typically adjusts rates in 25 basis point (0.25%) increments, though larger moves are possible

• Economic conditions, inflation data, and employment figures throughout 2025 could significantly influence the Fed's decisions

• The Fed's current projections are not commitments and can change based on economic conditions

• Market expectations and Fed projections often differ from actual policy decisions

Reference: https://www.newyorkfed.org/markets/reference-rates/effr