Nearly 40% chances of stagflation by end of 2026, traders say
CNBC • • business
Key Points:
- The consumer price index (CPI) rose to 3.8% year-on-year in April, the highest since May 2023, while wholesale prices saw their largest annual increase since 2022, signaling persistent inflationary pressures.
- Kalshi traders estimate a more than 65% chance that inflation will reach at least 4.5% this year, significantly above the FactSet consensus forecast of 2.8%.
- Economists warn of a potential short period of stagflation—characterized by low growth and higher inflation—if a recession occurs, though not to the severe extent experienced in the 1970s and early 1980s.
- The unemployment rate remained steady at 4.3% in April and has stayed above 4% since May 2024, indicating continued labor market resilience despite inflation concerns.
- Market predictions for economic outcomes vary, with Kalshi traders assigning only a 21% chance to a soft landing scenario, while Polymarket traders give a 22% probability to stagflation and 32% to a soft landing.