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Option Traders See Payrolls Cementing Two or Three Cuts in 2026

Edward Bolingbroke
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Federal Reserve rate-cut expectations have narrowed to two or three reductions in 2026, according to short-term interest-rate traders adjusting positions ahead of key jobs data. Traders shifted to a slightly more conservative stance after initially betting aggressively on a dovish Fed following Kevin Warsh’s nomination as Fed chair earlier in February. The pivot comes before Wednesday’s payroll report, which markets anticipate will reinforce the central bank’s policy direction amid economic uncertainty. Warsh’s potential leadership has fueled speculation about looser monetary policy, though recent trades suggest tempered optimism compared to earlier aggressive rate-cut wagers. Options activity reflects a consensus that labor market data will be pivotal in determining whether the Fed delivers two or three quarter-point cuts this year.
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Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the worldAmericas+1 212 318 2000EMEA+44 20 7330 7500Asia Pacific+65 6212 1000Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the worldAmericas+1 212 318 2000EMEA+44 20 7330 7500Asia Pacific+65 6212 1000The Fed:The Marriner S.

Eccles Federal Reserve building in Washington.Short-term interest-rate traders are coalescing around a bet that would pay off if the Federal Reserve cuts interest rates just two or three times this year.Since earlier this month when President Donald Trump nominated Kevin Warsh to chair the central bank, traders have been piling into wagers on a dovish Fed. But now their bets are slightly more conservative ahead of a widely anticipated read on the jobs market set to be released Wednesday.

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