Traders are dramatically repricing Federal Reserve policy, with April 2027 rate expectations surging across multiple thresholds. The market now implies a 77¢ chance of rates above 3.00% by April 2027, up from 39¢ — a stunning 38¢ move that signals a fundamental shift in monetary policy expectations.

The hawkish repricing extends across the rate structure: odds of rates above 2.50% jumped 27¢ to 65¢, while the probability of rates exceeding 3.50% climbed 21¢ to 53¢. As of December 2025, inflation rates still remain above the Fed 2% target, and the Fed projects inflation to remain elevated, with PCE inflation expected to end 2026 at 2.4% and PCE inflation of 2.1% by yearend 2027. This repricing suggests traders believe the Fed will need to maintain restrictive policy longer than previously anticipated, abandoning hopes for the aggressive easing cycle many had expected.