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- Hot August core inflation drove prediction market odds for a 25-basis-point Fed rate hike to 81.3%.
- Trading volume across Kalshi and Polymarket reached $192.6 million ahead of the September FOMC meeting.
Prediction markets sharply increased the implied odds of a 25-basis-point Federal Reserve rate hike in September after August core inflation came in hotter than expected, with DeFi Rate’s cross-venue probability rising to 81.3% and total volume across Kalshi and Polymarket Global reaching $192.6 million.
The repricing matters because it shows how quickly macroeconomic data is moving regulated and adjacent prediction markets tied to major U.S. policy decisions. The next key date is the Federal Open Market Committee meeting on Sept. 15-16, when the Fed is scheduled to announce its decision.
Inflation report triggers rapid repricing
According to the source report, DeFi Rate’s aggregate probability for a quarter-point hike climbed from 63.7% to 81.3% in 24 hours after the Sept. 11 inflation release. It had been about 60.5% before the CPI report and reached 78.6% in the first hourly snapshot afterward.
At the same time, the cross-venue probability that the Fed would leave rates unchanged fell from 35.5% to 18.1%.
The underlying economic data came from the Bureau of Labor Statistics, which said consumer prices rose 0.4% in August after a 0.1% increase in July. Headline inflation held at 3.4% year over year, while core CPI rose 0.3%, above the 0.2% economists had expected and its largest monthly advance since April.
The report also cited a 3.9% increase in gasoline prices, with the broader energy index up 2.1% in August and 16.3% over the past year. Shelter costs rose 0.3%, while airline fares, lodging away from home and transportation services also increased.
Kalshi and Polymarket see heavy Fed-contract trading
Trading activity was concentrated on Fed decision contracts at Kalshi and Polymarket Global. The source said Kalshi showed about $10.1 million in 24-hour volume across its 25-basis-point hike and no-change contracts, while equivalent Polymarket contracts generated about $12.3 million over the same period.
The article also said Polymarket US self-certified September Fed decision contracts on Friday, extending the range of venues offering exposure to the event.
For comparison, CME FedWatch briefly put the probability of a quarter-point increase at 91% before settling near 87%, up from 72% on Thursday.
If the Fed does raise rates by a quarter point, the benchmark range would move up from the current 3.50%-3.75% level cited in the report. Economists cited in the article now expect the Fed’s preferred core PCE measure to have risen 0.3% in August.
Former Fed official Kevin Warsh said in August policymakers would still “have work to do” if they could not gain confidence that inflation was returning to 2%. Economist Sung Won Sohn said the Fed could not afford to let an energy shock become “an everything shock.”
Source: As reported by Cheryle Shepstone.
