Kalshi may be more useful than some traditional economic forecasting methods, Fed researchers find

"A new research paper published by a trio of Federal Reserve economists suggests that the prediction market platform is a useful method for measuring macroeconomic expectations - and it may even be better than some traditional methods. "Our results suggest that Kalshi markets provide a high-frequency, continuously updated, distributionally rich benchmark that is valuable to both researchers and policymakers," the researchers wrote."

"The first was on forecasting inflation. The researchers found that when it comes to headline consumer price index (CPI), Kalshi's expectations represented a "statistically significant improvement" over the Bloomberg consensus, an oft-cited aggregation of financial analysis forecasts. The second was on predicting Fed rate decisions. The researchers found that the median and mode of Kalshi's prediction markets have a "perfect forecast record" on the day before the Fed meeting, which is a "statistically significant improvement" over Fed Funds futures."

Kalshi prediction markets provide a high-frequency, continuously updated, distributionally rich benchmark valuable to researchers and policymakers. Kalshi markets outperformed traditional forecasting methods in two specific tests. Kalshi expectations showed a statistically significant improvement over the Bloomberg consensus for headline consumer price index (CPI) forecasts. Kalshi median and mode exhibited a perfect forecast record on the day before Fed meetings for rate decisions, improving significantly on Fed Funds futures. Kalshi delivers real-time responses to events, supplying more up-to-date information than typical surveys or forecasting methods. Kalshi emphasizes its utility as informational rather than purely a betting platform.

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