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The Setup
Wednesday's CPI release will show November inflation data. The Cleveland Fed's Inflation Nowcast - updated daily using oil prices, gas prices, and other real-time data - currently estimates:
Headline CPI: 0.32% month-over-month
Core CPI: 0.25% month-over-month
Meanwhile, Kalshi's "CPI > 0.2%" market is trading at just 46 cent.
If the Cleveland Fed is right, that market should be closer to 80-90%.
The Methodology
The Cleveland Fed nowcast model has a strong track record. From their own research:
"The Cleveland Fed model's nowcasts for CPI inflation tend to be more accurate than the consensus (average) nowcasts from the Blue Chip Economic Indicators survey."
The model updates daily using high-frequency data including oil futures, retail gasoline prices, and the previous month's CPI components. As of December 12, it's showing 0.32% for headline and 0.25% for core.
The Markets
Market | Bid | Ask | Implied % | Cleveland Fed |
|---|---|---|---|---|
CPI > 0.2% | 33c | 46c | 39.5% | 0.32% - YES |
Core CPI > 0.2% | 16c | 33c | 24.5% | 0.25% - YES |
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The Trades
Primary: CPI > 0.2% YES at 46c
Cleveland Fed says 0.32%. That's comfortably above 0.2%.
Entry: 46c
If correct: Pays 100c (117% return)
Edge: ~30-40c if nowcast is accurate
Secondary: Core CPI > 0.2% YES at 33c
Cleveland Fed says 0.25%. That clears the 0.2% threshold.
Entry: 33c
If correct: Pays 100c (203% return)
Edge: ~25-35c if nowcast is accurate
Note: The 0.25% estimate is closer to the 0.2% threshold than the headline number. More risk here, but better odds.
Why the Market Might Be Wrong
Consensus lag: Wall Street consensus estimates often lag real-time nowcast models. The Cleveland Fed updates daily; consensus surveys are weekly or less frequent.
Data quality issues: with the Shutdown, some reports could be delayed / statistics not available to incorporate into the CPI.
Recent trend: October CPI came in at 0.2%. Markets may be anchoring to that number, expecting a repeat.
Energy volatility: Gas prices rose in November. The Cleveland Fed model captures this; survey respondents may not have fully incorporated it.
Risks
Model error: The Cleveland Fed isn't perfect. Their nowcast has a standard error - 0.32% could come in as 0.25% or 0.39%.
Rounding matters: BLS reports to one decimal. If actual is 0.24%, it rounds to 0.2%, which is NOT > 0.2%. The core CPI trade at 0.25% estimate is uncomfortably close to this edge case.
Seasonal adjustments: CPI uses seasonal adjustment factors that can cause surprises, especially in shelter and energy components.
We're wrong: High volume markets tend to be efficient. Maybe traders know something the Cleveland Fed doesn't.
Bottom Line
The Cleveland Fed nowcast says headline CPI will be 0.32% and core will be 0.25%. Both clear the 0.2% threshold that Kalshi is pricing at 39.5% and 24.5% respectively.
If you trust the Fed's model (and historically you should), there's 30-40 cents of edge on the headline trade and 25-35 cents on core.
I like CPI > 0.2% YES at 46c as the primary play. Core is higher risk/reward but closer to the threshold.
Our Track Record
Powell Press Conference (Dec 10, 2025)
Market | Side | Entry | Result | P&L |
|---|---|---|---|---|
Unchanged | Yes | 29c | Won | +240% |
Beige Book | No | 37c | Won | +170% |
Pandemic | Yes | 61c | Won | +65% |
QE | No | 78c | Won | +28% |
AI | No | 23c | Lost | -105% |
Tariff Inflation | No | 55c | Lost | -100% |
Trump | Yes | 12c | Lost | -100% |
Result: +29% ROI (4 wins, 3 losses)
Weather Markets
Date | Market | Entry | Result | P&L |
|---|---|---|---|---|
Dec 12 | LA 73-74F YES | 9c | Lost | -100% |
Result: 0-1 on weather
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Nothing here is trading advice — just data, probabilities, and our best read of the markets. Event-market trading involves risk and you should make your own decisions. We may hold positions in the markets we discuss and receive compensation through affiliate links.