Hello and welcome back to another paid post!
Reviewed and updated 26 July 2026
Today we will take a look at whether prediction markets can forecast macroeconomic data more accurately than professional surveys, and how statistical tests show Kalshi’s ability to predict inflation, unemployment, and Fed rate decisions.
Let’s dive right in.
The Idea
Every month, professional economists produce forecasts for three numbers that move markets: CPI inflation, the unemployment rate, and what the Federal Reserve will do with interest rates. These forecasts drive bond positioning, mortgage pricing, and portfolio strategy.
Prediction markets offer a different approach. On Kalshi, you can buy a contract that pays $1 if CPI comes in above 3% next month. The price of that contract reflects the market’s collective risk-neutral probability estimate, updated continuously as new information arrives. No survey lag. No wait time period for the next Bloomberg consensus.
The paper runs statistical tests to evaluate how good these markets actually are. It uses Kalshi data and compares its forecasts with the Survey of Market Expectations, fed funds futures, and Bloomberg consensus.
How the Contracts Work
For a given CPI release, there are contracts at multiple thresholds: ‘above 2.0%’, ‘above 2.5%’, ‘above 3.0%’, and so on. The prices of these contracts together imply a full risk-neutral probability distribution, not just a point estimate.
The paper gives a federal funds example: if the ‘above 4.0%’ contract trades at $0.40 and the ‘above 4.25%’ contract at $0.22, the market is saying there is roughly an 18% chance the target range falls between 4.0% and 4.25%. Apply this logic across all thresholds and you have a complete, daily-updating forecast distribution.
Kalshi covers CPI (headline and core), unemployment, payrolls, GDP growth, and Federal Reserve rate decisions. For GDP and core CPI especially, Kalshi is one of the only sources of a real-time, market-based probability distribution. Most alternatives either provide a point estimate or require a few weeks wait for a survey.