Betting markets are now pricing in a 61.5% chance that the Federal Reserve will hold interest rates steady at its September meeting, up from lower levels earlier this week. The shift came after Fed Chair Kevin Warsh testified before the Senate Banking Committee on Tuesday, following a House appearance the day before.
Warsh reiterated his focus on inflation but offered few specific policy clues during his testimony. That lack of clarity appears to have nudged traders on the prediction platform Polymarket toward a no-change scenario for the central bank's next rate decision.
What Warsh said — and didn't say
In his second day of congressional testimony, Warsh stuck to a familiar script. He emphasized that the Fed remains committed to bringing inflation down to its 2% target, but he did not signal any urgency to cut rates or raise them. Lawmakers pressed him on the timing of potential rate moves, but the chair declined to commit to a specific timeline.
That cautious tone, combined with the lack of fresh data or policy signals, seems to have reinforced the view among Polymarket users that the Fed will hold its ground in September. The odds for a hold climbed from roughly 55% before the testimony to 61.5% by Tuesday afternoon.
Why the odds matter
Polymarket is a decentralized prediction market where users bet real money on the outcomes of events. While not a scientific poll, the platform's odds are often seen as a real-time gauge of market sentiment. The shift suggests that traders are pricing in a higher probability that the Fed will keep rates unchanged, despite some earlier speculation about a possible cut.
The September meeting is the next scheduled Fed decision after the July meeting, which is widely expected to result in a hold. The CME FedWatch Tool, which tracks fed funds futures, also shows a high probability of no change in September, though Polymarket's move was more pronounced.
Inflation remains the key variable
Warsh's testimony did not introduce any new data or policy framework. He repeated that the Fed needs to see more evidence that inflation is sustainably moving toward 2% before adjusting rates. That cautious stance aligns with recent comments from other Fed officials, who have stressed patience.
Some market participants had hoped for a clearer signal on the timing of rate cuts, especially after softer inflation readings earlier this year. But Warsh's testimony poured cold water on that expectation, at least for now.
The next major data point will be the July consumer price index report, due out in mid-August. If inflation continues to moderate, the odds of a hold could shift again. But if price pressures prove sticky, the September hold probability may climb even higher.
The Fed's next policy meeting is July 30-31, where rates are expected to remain unchanged. The September meeting, scheduled for Sept. 17-18, will include updated economic projections and a press conference from Warsh. That's when the committee could signal a shift, if the data supports it.
For now, the betting markets are leaning toward inaction. Whether that changes depends on the inflation data between now and September — and on whether Warsh or other Fed officials offer more concrete guidance in the weeks ahead.
