What if stagflation becomes entrenched in Britain?
UK wage-price spiral forcing the BoE to hold into recession is classic stagflation — short gilts (real yields up), short UK consumer cyclicals, with GBP caught between sticky inflation and weak growth. Rhymes with the 2022-23 UK double-digit CPI episode when the BoE hiked into stagnation and gilts sold off on entrenched inflation. Transmission: persistent UK inflation lifts real yields and gilt term premium; growth-sensitive UK equities lag. Forward angle: UK structural labor-supply tightness (post-Brexit, NHS waitlists) makes the wage spiral stickier than peers, so fade hopes of quick BoE cuts.
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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. Wages and prices spiral as growth stalls, forcing the BoE to hold rates into a recession. The trigger decomposes into signed root‑shocks — Fed policy path ▲ · Inflation surprise ▲ · Recession signal ▲ — which propagate through our causal graph to the markets below.