Economic prediction markets: Fed, inflation and data releases
How Fed and CPI prediction markets define basis points, CPI series, rounding and revisions, with a worked illustrative rule-to-number example.
In this guide
The contract is the rule, not the headline
Economic prediction markets look clean from the outside: will the Fed cut, will inflation come in under a threshold. What you actually hold is a written rule. In an ordinary binary resolution, a winning share pays 1 and a losing share pays 0. A rare unknown or 50-50 outcome can pay 0.50 per share, and that is not the same as a universal cancellation or refund. The rule names the source, the deadline and the edge cases, so a title by itself tells you almost nothing about who gets paid.
2 layers decide an economic market. First, the underlying release: what the Fed statement says, what the CPI print says, in which series and units. Second, the rule text that maps that release onto a yes or no. Check that the release series, units and period match the written contract before interpreting the result.
Fed questions: basis points and the exact range
The Federal Open Market Committee (FOMC) is the part of the Federal Reserve that sets the target range for the federal funds rate. Its official calendar lists meeting dates and its statements announce the decision. A market on a Fed move should state which range applies before and after, or the change in basis points. One basis point is 0.01 percentage point, so 25 basis points equal 0.25 percentage point, not 25 percent. A hypothetical move from a 4.00 to 4.25 percent range down to 3.75 to 4.00 percent lowers each bound by 25 basis points. Nothing here forecasts the next rate, and a market price is not proof of what policy will do.
Check whether the rule references the upper bound, the lower bound, the midpoint or the effective rate. A 25 basis point cut in the lower bound can be a different number from a change in the midpoint if the width of the range also shifts. If a market says the Fed will cut, the rule has to say which rate and by how much. The Fed guide covers how meeting dates and decisions are reported, and you should come back to the market rule with those specifics in hand.
Inflation questions: pin down the CPI series
CPI stands for Consumer Price Index, a monthly measure of prices for a basket of goods and services published by the U.S. Bureau of Labor Statistics (BLS). The BLS separates seasonally adjusted from unadjusted CPI: seasonal adjustment removes recurring seasonal patterns, unadjusted data keep them. Seasonal factors are updated each year with the January data, and the prior 5 years of adjusted figures can be revised. A market that names CPI still has to name the index, the month, the frequency (monthly or annual), the scope (headline or core) and the adjustment (seasonal or not). A monthly change and a 12-month change are different numbers, and the first published figure can differ from a later revised series.
Check whether the contract specifies headline CPI or core CPI, so a headline rule and a core rule can settle differently from the same report. If the rule says first publication, a later revision does not matter; if it says revised, the first number may not settle anything. Read the inflation guide to identify the series and period before you compare them with the rule text.
Worked example: rule to number, no forecast
This protocol is illustrative only, not an empirical study and not a forecast. It turns a Fed range change and a CPI reading into explicit checks, so the unit traps show up before you form any opinion on the economy.
Take a hypothetical Fed move from a 4.00 to 4.25 percent range down to 3.75 to 4.00 percent. Each bound falls 25 basis points, which is 0.25 percentage point, not 25 percent. Now take an illustrative headline CPI annual change of 2.9 percent against a threshold of 3.0 percent: strict comparison puts 2.9 below 3.0, so the condition is met. If the reading is 2.95 percent and the rule fixes the threshold at one decimal place, rounding to 3.0 can flip the result. If the rule uses the unrounded value, the original series decides. The same story about inflation can settle 2 markets in opposite directions, depending on precision and series.
| Input | Rule wording | Illustrative value | Comparison |
|---|---|---|---|
| Fed change | Target range lower bound falls by at least 25 basis points | 4.00 to 4.25 percent becomes 3.75 to 4.00 percent | A move of 25 bp equals 0.25 percentage point, so the condition is met |
| CPI threshold | Headline CPI annual change strictly below 3.0 percent | 2.9 percent | 2.9 is below 3.0, so the condition is met |
| CPI rounding | Same threshold, reading reported at 2 decimals | 2.95 percent | Rounds to 3.0 at one decimal, so the condition may not be met |
Resolution: payouts and the rare edge cases
In ordinary binary markets, the winning share pays 1 and the losing share pays 0. A rare unknown or 50-50 outcome can pay 0.50 per share, which is not a universal refund. The rules name the source, the deadline and the edge cases, and the resolution guide explains how that process works when the outcome is disputed or unclear. Polymarket documents UMA as the resolution mechanism for ordinary prediction markets, while Up/Down markets use Chainlink TWAP instead. Up/Down compares a time-weighted average price (TWAP) at the start and end over the same asset stream: final at or above start is UP, lower is DOWN. Different exchange candles can differ, so verify the actual rule rather than generalizing across durations and sources.
For an economic market, the named source is often the BLS release or the FOMC statement. If that release is delayed, revised, or published in a different series than the rule names, the edge case decides. If the rule is silent on a detail you need, treat the silence as risk, not as an implied answer.
| Market type | Question to settle first | Guide |
|---|---|---|
| Fed decision | Which target range and how many basis points changed | Fed guide |
| Inflation release | Which CPI series, period, adjustment and revision rule | Inflation guide |
| Political or policy timing | Who or what is the named decision-maker and date | Politics guide |
| Disputed or unclear outcome | Which resolution mechanism and source are named | Resolution guide |
Checklist before you compare your view to the price
Work the rule first, in this order: identify the source, then the period, then the units, then the comparison and rounding. For a Fed market that means the target range, the meeting date and the basis point change. For a CPI market that means the series, month, frequency, scope, adjustment and first-versus-revised rule. For a political or policy-timing outcome the named decision-maker and date matter, so the politics guide is the starting point. If the outcome is unclear or disputed, the resolution guide tells you which mechanism and source apply.
An illustrative losing case is entering on a headline, then finding that the rule referenced a different series, a rounded figure, or a bound the announcement did not change as expected. Record those criteria before the trade so that you can compare the settlement with the question you actually evaluated.
Sources & verification
Sources checked
Sources checked
Sources checked
PolyZeno. Automated review with DeepSeek V4.1 Flash.