FedWatch Probabilities

Most FedWatch tools re-plot CME’s numbers. This one computes the probabilities independently from Fed Funds futures and then puts that read on trial against two other money crowds: prediction markets (Polymarket and Kalshi — real dollars staked on explicit outcomes) and the data itself (a Taylor-rule reaction function fed by live CPI and unemployment). When all three agree, the path is priced with conviction. When they diverge, someone is wrong — and the divergence callouts at the top tell you who is likely to blink, and in which direction the repricing runs.

• Futures (what the market prices) — 30-Day Fed Funds futures (ZQ), converted meeting-by-meeting with the same methodology CME documents: when the month after a meeting has no meeting of its own, that month's contract is the post-meeting rate; otherwise the meeting month's implied average rate is solved for it. The implied move is split across the two adjacent 25bp outcomes, and the distributions chain forward across meetings. A move of more than 100bp at a single meeting is treated as a bad print and stops the chain rather than being shown.
• Prediction markets (what the crowd bets) — Polymarket's fed-rates event and Kalshi's per-meeting rate strikes. These attract a different crowd than rates desks — retail-heavy, narrative-fast. Persistent gaps against futures flag either dumb money to fade or early information to respect.
• The Taylor rule (what the data says) — r* + π + 0.5(π−2) + (u*−u) computed from live FRED CPI and unemployment. Not a forecast of the Fed — a benchmark for whether current policy is objectively tight or loose, and therefore which direction the pressure builds.

• Divergence callouts — the ranked disagreements between the three legs. 'Aligned' is information too — a fully-agreed path means positioning is crowded and surprises hit harder.
• A dominant bar (>70%) — the market has effectively priced that outcome. Surprises here move markets hardest, precisely because so little surprise was expected.
• The path, not the point — read the meetings together. The slope of the implied path matters more for risk assets than any single decision.
• Path drift — this tool snapshots its own implied path each day it refreshes. The drift chart shows how the market's year-end view has migrated — trend in the pricing is often more tradable than the level. Snapshots whose path jumps more than 100bp between meetings are calculation artefacts, not repricing: they are never stored going forward, and any older ones are listed under the chart instead of plotted.

Fed Funds futures prices come from Yahoo Finance (ZQ contracts, 15-minute cache); the current target range from FRED (DFEDTARU / DFEDTARL); FOMC dates from the Federal Reserve’s published calendar; prediction-market odds from Polymarket’s public gamma API and Kalshi’s public markets API (next meeting’s strikes near the current range; mid of bid/ask where quoted, last trade otherwise; marked unavailable when down or too thin); CPI and unemployment from FRED (CPI year-on-year matched by calendar month, so a month FRED never published can’t stretch it to 13 months). Everything recomputes on each 15-minute revalidate, and each day’s implied path is stored so the drift history accumulates.

Fed pricing sits in Space — it defines the monetary environment. A restrictive, “higher-for-longer” path favours defence, quality and a discount rate that pressures long-duration assets; a clear easing path loosens financial conditions and extends risk appetite. We do not trade the meeting. We use the implied path — and especially the disagreements around it — to decide whether the regime rewards offence or caution, then let Motion and Time locate and time the actual opportunity.