Fed Economists Endorse Kalshi for Macro Forecasts

Federal Reserve economists have endorsed prediction markets as a valuable tool for gauging macroeconomic expectations, finding that data from the platform Kalshi often surpasses traditional forecasting methods in accuracy and timeliness.

In a working paper released on February 12, researchers Anthony Diercks, Jared Dean Katz and Jonathan Wright compared Kalshi's market-implied probabilities with established benchmarks. They concluded that Kalshi provides a high-frequency, continuously updated benchmark that captures a full distribution of possible outcomes, making it useful for both researchers and policymakers. The study examined how these markets reflect beliefs about future economic events in response to news and policy statements.

The analysis highlighted Kalshi's edge in two key areas. For forecasting headline consumer price index inflation, Kalshi's expectations showed a statistically significant improvement over the Bloomberg consensus, which aggregates analyst surveys. On Federal Reserve interest rate decisions, the median and mode of Kalshi's predictions achieved a perfect record on the day before policy meetings, outperforming Fed funds futures. Over a roughly 150-day...