Fed Rate Decisions May Tap Prediction Market Data, Economist Says

The Economist reported on May 1 that the U.S. Federal Reserve is seriously examining whether data from prediction markets such as Kalshi can be used in interest-rate decisions and broader macroeconomic assessment.

According to the report, trading volume on U.S. peer-to-peer betting platforms such as Kalshi and Polymarket rose from $16 billion a year earlier to more than $50 billion last year, a more than threefold increase. Most activity is sports betting, but contracts also cover GDP, employment and inflation indicators.

Researchers including the Fed’s Anthony Diercks assessed in February whether Kalshi data could supplement surveys, financial markets and internal economic models. They found Kalshi’s prediction market performed better than rate futures and options in forecasting the terminal policy rate for specific months. Thin liquidity and price swings from small bets remain challenges.

Source: Yonhap Infomax