Will Interest Rates Go Down? What the Fed and Futures Say

Fed Funds Futures are contracts that pay out on the future level of the Federal Reserve's key interest rate. On 6 October 2026, their prices gave no chance of a lower US rate by the end of 2027. That reading comes from Investing.com's Fed Rate Monitor, which turns those prices into odds.

The Fed's own officials point the same way for now. In September, none of the 18 projected a cut before the end of 2026. Here is how to read both, how far each has missed and what would change the path.

The rate in question is the Federal Funds Rate, the rate banks charge each other for overnight loans. The Fed sets a target range for it. On 16 September 2026, the Fed raised that range by 0.25 points to 3.75% to 4%. It was the first rise since July 2023. We explain the rate in What Is the Fed Funds Rate?

The middle of the range is 3.875%. The Fed's projections use this middle figure too, so this guide compares against it.

The Fed's statement gave one reason for the rise: "Inflation remains elevated." Inflation on the Consumer Price Index (CPI) was 3.4% in August. Core inflation, which leaves out food and energy prices, was 3.0% on the Personal Consumption Expenditures (PCE) Price Index. The Fed's target is 2%, as we explain in Why Does the Fed Target 2% Inflation?

The chart shows the rate since 2024, the futures path and the officials' median projections. The futures path is an average of the possible ranges at each meeting, weighted by their odds. It climbs through mid-2027, then levels off. For December 2027, that futures average was 4.72%. The officials' medians are covered in the next section.

The odds on the morning of 6 October 2026, from Investing.com's Fed Rate Monitor:

These odds move fast. A week earlier, futures pricing gave a 74.6% chance of a rise on 28 October. On 2 October, the September jobs report showed payrolls up by 29,000. Reuters then put the October odds at about one in four.

Each dot is one official's projection, made at the 16 September meeting. The black lines mark the medians. The orange line marks today's 3.875%.

For the end of 2026, 16 of the 18 officials projected a higher rate than today. Twelve projected one more 0.25-point rise, while four projected two. The other two projected no change. None projected a cut.

The median stays at 4.1% for the end of 2027. It then falls to 3.9% at the end of 2028, which is today's level. It is 3.6% at the end of 2029. The SEP rounds these medians to one decimal place. For the longer run, meaning the level officials expect once the economy settles, the median is 3.2%.

So the median official projects no fall below today's level until 2029. Futures pricing shows a higher path still. The futures average of 4.72% for December 2027 is above every official's projection for that year end. The highest of those was 4.375%.

The chart compares each December's median projection for the year ahead with where the rate ended that year. From 2015 to 2025, six of the 11 projections landed within 0.25 points of the actual rate. Three missed by more than 1 point.

The largest miss was 2022. In December 2021, the median official projected 0.9% for the end of 2022. CPI inflation then rose to 9.1% in June 2022. The Fed raised rates seven times in 2022, ending the year at 4.25% to 4.5%. That was 3.5 points above the projection.

The SEP also warns about accuracy. It measures past misses by private and government forecasters of interest rates, from 2006 to 2025. On that record, the Fed puts the chance at about 70% that the rate ends within this distance of a forecast, either side:

The latest misses are still running. In December 2025, the target range was 3.5% to 3.75%. The median projection for the end of 2026 was 3.4%, one cut lower. Futures pricing went further. It priced two cuts in 2026, or a rate of 3.0%, Reuters reported on 10 December 2025. Instead, the Fed raised rates in September. Today's 3.875% equals the highest projection made that December.

In the September 2026 SEP, the median rate comes down as inflation does. The median projection for headline PCE inflation, which includes food and energy, is 3.7% for 2026. It drops to 2.3% in 2027 and 2.1% in 2028. The median rate starts to fall in 2028. Headline PCE inflation was 3.4% in August.

The Fed's two goals are stable prices and maximum employment. So the data that move the outlook most are inflation and jobs. Officials projected unemployment of 4.1% for the end of 2026. It was already 4.2% in September, as covered in What Is the Unemployment Rate? We explain how higher rates act on prices in Interest Rates and Inflation.

Read against the Fed's projections, the data split two ways:

The next dates are the September CPI report on 14 October and the Fed's decision on 28 October. The decision on 9 December comes with a new dot plot.

A few points help:

Will interest rates go down? On 6 October 2026, futures pricing showed no fall through 2027. The median Fed official projected none below today's level until 2029. Officials' projections have missed by more than 1 point in three of the last 11 years, while futures priced two cuts for 2026 and got a rise. So the next inflation and jobs data matter more than any single forecast.

This explainer is part of the YX Insights Academy. Each one takes a single idea and checks it against real data.

The same approach runs through everything else we publish:

Good places to start on the website:

DISCLAIMER: This article is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.