Good morning 🌅, and welcome to this week's edition of Kalshi Kit. We're diving into inflation and energy prices in this one, two topics that have been deeply intertwined all year.

• Last Wednesday's inflation print showed price pressures eased in July, rising 0% month over month.

• Weakening demand and increased production from OPEC has dragged oil prices below $90, its lowest point since Russia invaded Ukraine.

• The Wells Fargo Housing Market Index, which measures sentiment of the U.S. single-family home market, fell for the eighth consecutive month in July. Following the report, the National Association for Home Builders claimed that the U.S. is in a "housing recession".

Let's see how the Kalshi markets are responding to these recent developments:

Market Watch 👀 

August Inflation Data 📈

>0.0% Yes: 56¢ No: 44¢

Kalshi markets are predicting a 56% chance that the Consumer Price Index (CPI) will rise by more than 0.0% in August and a 44% chance it will not.

• In a recent interview, economist Nouriel Roubini stated that the Federal Reserve's course of action has not been hawkish enough to push inflation back to 2%. Roubini predicted that "inflation expectations are going to get unhinged" unless rates are hiked "well above 4.5%". Currently, the federal funds rate is projected to be 3.3% by the end of 2022.

• Falling energy prices and the cooling of the housing market has sparked hope that inflation has reached its peak. In July, energy prices fell 7.7% and single-family home construction starts contracted 10.1%. Roughly 16% of agreements to purchase homes were also cancelled in July. Big news given that housing makes up 40% of core CPI.

September Gas Prices⛽

>$3.70? Yes: 51¢ No: 49¢

Kalshi markets are forecasting a 51% chance that U.S. average gas prices will exceed $3.70 on September 12th. On the flip side, markets are predicting a 49% chance that U.S. average gas prices will be less than or equal to $3.70 on September 12th.

• Andrew Gross, spokesperson for AAA, stated in a recent interview that despite the recent decline in gas prices, they could be pushed back up shortly. Gross stated "falling pump prices may eventually lead to more drivers hitting the road again", spiking demand and prices at the pump.

• In response to pleas for increased production, OPEC has agreed to hike oil output by 100,000 barrels a day in September. Bleak economic data from China and Europe has also raised fears of a global recession, which would sharply decrease the demand for oil.

Hedge Against Your Student Loans 🎓

Last Tuesday, the Biden administration announced it would cancel an additional $3.9 billion in student loans for those who attended ITT Technical Institute. This brings the total amount of loans forgiven by the Biden administration to roughly $32 billion.

This total could rise significantly by the end of the month. Karine Jean-Pierre, White House Press Secretary, told reporters last week that Biden would make a final decision on his broader student loan forgiveness plan by August 31st.

Although official details of the plan have yet to be released, the policy is expected to forgive $10,000 for all borrowers earning less than $150,000 a year. Given that there are over 43 million Americans with student loans, if the plan is passed, this would amount to approximately $321 billion worth of student loans eliminated.

Top Democrats Chuck Schumer and Elizabeth Warren have called on Biden to pass a more aggressive forgiveness plan. Schumer and Warren have pushed for Biden to cancel $50,000 in loans for each borrower.

With Kalshi's student debt forgiveness contract, members can trade directly on the outcome of whether Biden will pass the forgiveness plan.

Using the contract, members with student loans can hedge themselves against the risk of Biden not passing the plan. By buying contracts on the "No" side, members can get paid in the event that Biden does not forgive student loans. These earnings could be used to pay off their existing debt.