The Effects of Monetary Policy on Macroeconomic Expectations: High-Frequency Evidence from Prediction Markets

Eric Swanson, Wang Renxuan and Yanbin Wu

No 35968, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: When the Federal Reserve raises interest rates, standard macroeconomic models and VARs predict that output, employment, and inflation should fall over the next several quarters. However, monthly-frequency professional macroeconomic forecast revisions are sometimes positively correlated with Fed interest rate changes, leading to a debate about what could explain these puzzling correlations. We bring to bear new high-frequency data on this question from macroeconomic event contracts traded on Kalshi, a CFTC-licensed, U.S.-based event trading exchange and prediction market. These high-frequency event contracts allow us to isolate and estimate the effects of monetary policy and other announcements on Kalshi market-implied macroeconomic expectations. Our results are consistent with standard transmission channels from monetary policy to the macroeconomy, with little or no role for a “Fed Information Effect”.

JEL-codes: E43 E52 E58 G14 (search for similar items in EconPapers)
Date: 2026-10
Note: ME
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