FOMC / fed funds rate
Updated November 10, 2026
The FOMC (Federal Open Market Committee) sets US monetary policy, including the fed funds rate target range. Markets price expected hikes, cuts, and holds. CME FedWatch derives probabilities from futures; prediction markets offer parallel event contract prices.
Before a meeting, fed-rate markets might show 72¢ on “cut 25 bp”, roughly 72% implied probability on a $1 binary (before spread/fees).
- Before the meeting“Cut 25 bp” trades at 72¢
Roughly 72% implied probability.
- After the statementContracts settle
Contracts settle against the official target range change.
Futures-implied rate paths are often reported as CME FedWatch probabilities; CME asks media to use that attribution when quoting them.
The committee and the rate
The FOMC has twelve voting members: the seven members of the Federal Reserve Board of Governors, the president of the Federal Reserve Bank of New York, and four of the other eleven Reserve Bank presidents, who rotate. It holds eight regularly scheduled meetings a year and can meet in between when needed.
The fed funds rate is the interest rate banks charge each other for overnight loans of reserve balances. The FOMC sets a target range for it, typically 25 basis points wide, such as 5.25%–5.50%. The rate banks actually pay, the effective fed funds rate published by the New York Fed, trades inside that range. Changes to the range are conventionally made in 25 bp steps, though the convention isn’t a rule.
How fed-rate contracts are structured
Most fed-rate contracts are date and direction: will the target range be lowered, raised or held at a given meeting, and by how much. A single meeting is often split into several contracts, one per outcome. Because only one outcome can happen, their yes prices should add up to roughly $1 when the outcomes cover every possible result, before spread and fees. An illustrative set around the 72¢ example:
- Cut 25 bp
- 72¢
- Hold
- 24¢
- Cut 50 bp
- 4¢
The date language decides which decision counts. Because the FOMC can act between scheduled meetings, a contract tied to a specific meeting and one tied to a window of dates can settle differently on the same move. How economic-data markets work covers how these contracts settle and what can go wrong.
FAQ
How often does the FOMC meet?
Eight regularly scheduled meetings a year, plus additional meetings when needed.
What is the difference between the Fed and the FOMC?
The Federal Reserve is the US central bank system. The FOMC is the committee within it that sets monetary policy, including the target range for the fed funds rate.
How do prediction markets price a Fed decision?
Each outcome for a meeting trades as its own yes/no contract. A price of 72¢ on “cut 25 bp” reads as roughly a 72% implied probability, before spread and fees.