Not sure why this is so low. Q1 above 3% confirmed, q2 forecast above 3%

So odds on for 2024

The big question is 2025

@IsarBhattacharjee forecasts are still for declines in 2024 to less than 3% at EOY. And then it's not random after that - if inflation isn't returning to target fast enough the Fed will wait longer before cutting rates, maintaining downward pressure on inflation (suspect they won't have to actually raise them unless they get some real surprises).

@chrisjbillington sure but is the probability of a global shock to inflation 15% or less? Not sure it is

@IsarBhattacharjee Yes. I think it's lower than that, even, but the time horizon of this market is too long for it to be worth betting it lower.

How frequent are global inflation shocks? They don't happen in 15% of all years.

@chrisjbillington were not in a random year though. We have several ongoing wars and geopolitical tensions rivalling the 70s.

Plus another surge and expectations may well unanchor - 1 and 5 year michigan inflation expectations are already ticking back up

Anyway if you disagree feel free to bet against

@IsarBhattacharjee it's not worth betting given the timeframe. But I'm currently thinking about how to set up derivative markets that can help create leverage to make longer-term betting more worth it, if I figure out a good approach I'll let you know.

The thing is that you could make an equally compelling case that any year is not an average year. There is always something going on, and people always think it's especially atypical at the current moment. In the past years we've had other wars and crises. I know it viscerally feels like it's worse now, but I don't think that's obvious from the outside.

@chrisjbillington that would be interesting. A lot of the time I bet on misproced markets with the intention of cashing out once prices adjust

On the inflation stuff - I guess I have a "house view" that it's gonna stay elevated for a while longer. The question to me is how long is that while - which is also a function of geopolitics, feds reaction function, expectations and current fluctuations

@IsarBhattacharjee Probably shouldn’t be surprised that I lean your direction. Though for transparency pretty sure my biggest loss was giving @chrisjbillington money in 2023 cpi market.

Recently I’m thinking in particular about dynamics under trump. Seems very plausible to me that his policies would make 2025/26 inflation of 3% more like 50/50, which would suggest this market should be at least 25% now

@Tyler31 And why don’t we just create market on 5 or 10 year bei at year end. Would that address the timing issues you’re both mentioning?

Does the rate have to be at or above 3% in each calendar year to resolve YES? Or is this asking whether the cumulative rate over the 3 years will be above 3% per year?

@Tyler31 The former so at or above 3% in each calendar year