What if the Fed badly misjudges inflation as it tops 5% again?
Core back above 5% with the Fed conceding model failure is a bear-steepener: front-end and reals gap up together, breakevens un-anchor, and long-duration tech is sold hardest as the discount rate jumps. This is the August/September 2022 hot-CPI playbook — the S&P's worst day since 2020 and a fresh leg into the bear market. Forward: starting from a higher term premium and a politically pressured Fed, the credibility loss bites the long end harder than 2022.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
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 0–6 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. Fed admits its model failed as core inflation re-accelerates above 5%, gutting forward-guidance credibility and steepening the curve violently. The trigger decomposes into signed root‑shocks — Fed policy path ▲ · Inflation surprise ▲ — which propagate through our causal graph to the markets below.