Bets on an emergency Federal Reserve rate cut are rising sharply Monday, as mounting fears of a looming U.S. recession and sudden, severe stock market crashes – already erasing trillions in market value – prompt speculators to anticipate swift central bank action ahead of scheduled meetings.
On the CFTC-regulated prediction market platform Kalshi, contracts betting on “the number of emergency rate cuts this year” have gained notable traction in recent hours.
Odds eyeing two emergency cuts equivalent to 50 basis points in rate easing have spiked to 10% from nearly null chances a week ago. The last time the Fed executed an emergency cut was in March 2020, when it slashed rates by 50 basis points amid the escalating COVID-19 crisis.
A $10 bet on two emergency rate cuts—equivalent to a half-point drop in interest rates—would return $90 if realized.
Meanwhile, Fed futures are now pricing in five rate cuts by the end of the year, according to the CME FedWatch tool.
Traders are growing wary of cracks in the U.S. economy. The sudden rise in rate cut wagers reflects a broader fear: that either markets or the macroeconomic picture could deteriorate so quickly that the Fed is forced to step in ahead of schedule.
Conspiracy Theories of A Self-Engineered Recession Emerge
Fueling the speculative fire are political theories that the Trump administration may be intentionally inducing a recession.
The logic? Lower inflation, lower interest rates and stronger control over monetary conditions.
On Monday, Trump took to Truth Social with a bold message: “Oil prices are down, interest rates are …