What if the Fed swaps its 2% goal for a nominal-GDP target?
Switching to an NGDP-level rule is a regime change that lifts breakevens while capping reals: the curve bull-steepens as the market prices tolerated overshoot, and gold/long-duration assets should bid — the supplied cascade under-reacts. No clean modern analogue; the nearest is the 2020 FAIT average-inflation shift, which re-steepened the curve and weakened the dollar. Forward: an explicit level target front-loads catch-up inflation, a bigger breakeven move than FAIT delivered.
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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 mixed shock. The Fed abandons 2% inflation targeting for a nominal-GDP-level rule, repricing long-end real yields and inflation breakevens overnight. The trigger decomposes into signed root‑shocks — Inflation expectations ▲ · Real yields ▼ · Yield-curve slope ▲ — which propagate through our causal graph to the markets below.