Latest CPI Outlook

In a moment, CPI will be announced... The important parts are the two circled in the chart... One is the annual rate, and the other is the core monthly rate...
The CPI annual rate above, 4.2%, is already a very strong consensus in the industry.
This is a number that can be calculated based on the announced data.
FactSet economists' survey median is 4.2% (manual survey).
Cleveland Fed nowcast rolling reading is 4.18%, rounded to exactly 4.2% (machine model).
Kalshi has 47% betting on 4.2% (actual bet).
So when the manual survey, machine model, and real money all point to the same 4.2%, this CPI forecast is quite strong...
But on Kalshi, there's also a 32% bet on 4.3%.
So the market has also priced in some of 4.3%.
Therefore, 4.3% is not particularly surprising to the market (mainly just rounding differences, likely on the edge between 4.2% and 4.3%, due to rounding up or down).
But if it’s 4.1%, that would be very positive. (A low probability, not fully priced in by the market).
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The real disagreement lies in the core monthly rate below...
The core monthly rate varies greatly...
The most dovish, Goldman Sachs, at 0.17%; the most hawkish, JPMorgan, at 0.27%.
Cleveland Fed model +0.31% (using high-frequency data calculations).
Kalshi still leans toward betting on 0.2%...
So traders are betting on 0.2%, while the model predicts around 0.3%, showing a big divergence.
Because the core rate is an estimated figure, the divergence is large. The focus of the estimate is on tariff transmission and airline ticket prices.
(For example, doves say airline tickets have already dropped in price... Hawks say that’s because jet fuel prices haven't transmitted to ticket prices yet...)
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So today's conclusions:
1. The CPI number is likely to be disappointing (around 4.2%, the highest in three years), but the market might interpret this as the peak, as oil prices have fallen back over the past three weeks, and whether the market will cool down after actual trading remains to be seen.
2. What determines the trend is whether the core CPI monthly rate is 0.2% or 0.3%.
This difference will decide next week’s Fed dot plot and stance—whether hawkish or dovish (Wosh’s first scenario).
So today, if CPI >= 4.3% and the core monthly rate is above 0.3%, it might cause another sell-off.
If CPI is 4.2%, then it depends on whether the core is 0.2% or 0.3%, and also on the decimal points of the core.
0.25% and 0.29% will both show as 0.3%, but market reactions will differ, so check the BLS report for the exact decimal points.
If CPI <= 4.1% and core is below 0.2%, inflation cools off, and V-shaped recovery.