Fed Funds Rate Cut Market on Kalshi Increases from $0.09 to $0.14

From June 5th to June 6th, 2024, the Kalshi prediction market for whether the Federal Reserve would cut its target federal funds rate range at least once between August 29, 2023, and July 31, 2024, increased from $0.09 to $0.14. A significant driver of this price movement was the release of the latest U.S. employment data. On June 5th, the Bureau of Labor Statistics reported that nonfarm payroll employment increased by only 175,000 in May, which was below expectations and indicated a slowing labor market. The unemployment rate remained unchanged at 3.9%, suggesting that job growth was losing momentum. This weaker-than-expected employment report likely heightened concerns about economic slowdown and increased market speculation about a potential rate cut by the Federal Reserve. Additionally, the OECD released its Economic Outlook around the same time, projecting that global growth would remain modest and highlighting the resilience of global activity despite tighter monetary conditions. The report noted that inflation was falling faster than initially projected, which could ease pressure on central banks to maintain restrictive monetary policies. This optimistic view on inflation and economic resilience might have further influenced market participants to anticipate a more accommodative stance from the Federal Reserve. The combination of the disappointing employment data and the OECD's positive inflation outlook likely contributed to the increased likelihood of a rate cut as reflected in the Kalshi prediction market.