What if EM rate-cut misstep reignites inflation and forces a U-turn?
Premature EM easing lets inflation rebound, forcing an embarrassing reversal that un-anchors expectations and whipsaws the currency, denting carry and credibility across the bloc.
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The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 6–18 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Premature EM easing lets inflation rebound, forcing an embarrassing reversal that un-anchors expectations and whipsaws the currency, denting carry and credibility across the bloc. The trigger decomposes into signed root‑shocks — EM currencies ▼ · FX carry appetite ▼ · Credit spreads ▲ · Inflation expectations ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.