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.
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”. We thank Miguel Acosta, Anthony Diercks, Valentin Haddad, Dun Jia, Benoit Nguyen, Nancy Xu, and seminar participants at the University of Southern California, European Central Bank, UC Irvine, Asian Conference on Macroeconomic Expectations 2025, Columbia Business School Ph.D. Alumni Conference, 2025 World Congress of the Econometric Society, CEIBS Finance and Accounting Symposium, 2025 FIRS Annual Meeting, 2025 European Finance Association Meeting, 2026 AFA Annual Meeting, 2026 Institute for Monetary and Financial Stability Conference, 2026 MFA Annual Meeting, the March 2026 Virtual Seminar on Monetary Economics, CICF 2026, 2026 SED Meetings, 2026 Money, Macro, and Finance Conference, and 2026 Conference on Real-Time Data, for helpful discussions, comments, and suggestions. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. In addition toworking papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals—theNBER Reporter, theNBER Digest, theBulletin on Health, theBulletin on the Economics of Alzheimer's, and theBulletin on Entrepreneurship—as well asresearch spotlights, lectures, and panel videos.