The federal funds rate is the interest rate at which commercial banks lend reserve balances to each other overnight. The Federal Reserve's policy committee sets a target range for this rate, which influences broader economic borrowing costs and financing conditions across the entire economy. The upper bound of this range is a key policy lever the Fed uses to manage inflation and economic growth. As of early 2026, the Federal Reserve has been navigating post-pandemic inflation pressures, with the target range currently positioned higher than the 1.25% level specified in this market. For the upper bound to reach 1.25% by December 2026 would require the Fed to cut rates substantially—approximately 200+ basis points from current levels—a shift that would signal dramatic economic deterioration requiring aggressive monetary easing. The current market odds of just 3% reflect market consensus that such aggressive easing over nine months is highly unlikely given prevailing economic conditions and inflation expectations. This market resolves based on the official federal funds rate target established by the Federal Reserve's final policy meeting of 2026.