Three researchers at the U.S. Federal Reserve have proposed integrating data from the prediction market Kalshi into the Fed’s decision-making process. Their paper, "Kalshi and the Rise of Macro Markets," suggests Kalshi offers a more accurate, real-time measure of macroeconomic expectations than traditional surveys and market-implied forecasts.
The researchers argue that managing expectations is crucial for modern macroeconomic policy, and Kalshi provides a high-frequency, continuously updated benchmark. This data could be used to construct risk-neutral probability density functions for Federal Reserve interest rate decisions, offering a more direct view than current benchmarks.
Kalshi allows traders to bet on outcomes related to key economic indicators like the consumer price index, payroll data, and GDP growth. The researchers highlighted Kalshi's "rich intraday dynamics," noting its probabilities respond sharply to major economic news and policy statements, providing faster-updating distributions than currently available tools.