Fed’s decision on Wednesday is awaited by Americans but more so by Polymarket bettors. One investor bet $7k on a decrease in interest rates by 25bps. However, the odds are pointing in a different direction.
According to the majority of polymarket bettors (98%), the Fed will not change the interest rates. On the other hand, 1.9% of traders think that the Fed will lower the rates by 25bps. If the latter goes through, the trader could make $400k. However, that is close to impossible.
This guy will make $400,000 if the Fed cuts rates tomorrow.
He bet $7k.
Money pit or trade of the year? pic.twitter.com/n4tcD6qfT7
— Polymarket (@Polymarket) May 6, 2025
Trump’s erratic implementation of the highest US tariffs in a century has devastated consumer and business confidence, slowed down manufacturing, and caused a huge rush on imports. This has caused the US to go closer to the odds of a recession.
Jerome Powell shows no interest in lowering the rates, not after the insults that Trump has been throwing at him. He has made it clear that he is not in a hurry. However, never say never.
Interest rates are not expected to change anytime soon – blame tariffs
Rates are likely to stay the same at the Fed’s meeting on May 6-7, which will be the third meeting in a row. Eight times a year, the US central bank gets together to talk about the health of the economy and make decisions about monetary policy. These decisions affect the federal funds rate, which is the interest rate that US banks use to lend and borrow money overnight.
The Fed Chair Jerome Powell has made it clear that he will continue to keep an eye on the job market and inflation before making any cuts. There is too much doubt about the effects of the Trump administration’s economic plan, especially the trade war and government cuts.
After all, the official mandate of the Federal Reserve is to keep prices stable and employment at a high level. In the end, the Fed is keeping interest rates steady to see how tariffs and other actions taken by the Trump government affect these important indicators over time.
Since December, the Fed has kept the interest rate at 4.25% to 4.50%. According to Fed policymakers’ predictions from March, rates will go down twice this year. However, those predictions seem out of date now that there has been so much trade news.
Fed officials think that the tariffs will make both inflation and unemployment go up, but it’s not clear how much or how long. So far, the economic data does not show that the country is falling apart. Even though the US GDP fell by 0.3% yearly last quarter, consumer spending still grew at a good 1.8% rate.
In addition, on Friday, the Labor Department released its much-anticipated jobs report. It showed that US businesses added 177,000 jobs in April, which is about 40,000 more than expected. The unemployment rate stayed the same at 4.2%.
“The Fed’s monetary policy will depend on which side of their mandate, inflation or employment, is farthest from target,” said Matthew Martin, senior US economist.
Economists are still worried that taxes will make prices go up even more. In the meantime, people in the US are cutting back on spending because they are afraid of a recession, and investors are getting out of the stock market because it is falling so fast.
Americans are worried about jobs, taxes, prices, social services, and just about anything else that has an impact on their ability to make money.
Although the Fed won’t change interest rates tomorrow, the way it talks and acts has a big effect on the markets. Any talk of risk or uncertainty can spook investors and cause a chain reaction in the economy.
