Polymarket gives August CPI a 47% chance of printing 3.4%, but the entire trade comes down to a very small rounding window
Polymarket is giving a 47% chance that August headline CPI comes in at 3.4% year over year when the report is released September 11.
That makes 3.4% the clear favorite on the board, ahead of 3.3% at 35%. But the gap between those two outcomes is much smaller than the prices make it look.
August Inflation Odds at Polymarket
Here’s how Polymarket currently prices the report:
This market settles on the headline year-over-year CPI number reported by the BLS, rounded to one decimal place. Because of that rounding rule, a tiny difference in the underlying index can move the winning contract from 3.3% to 3.4%.
More than $56,000 has traded across the board, with most of the activity concentrated in those four outcomes.
Why 3.4% is such a narrow target
July’s CPI index was 333.918, compared with 323.048 a year earlier. That works out to an annual inflation rate of about 3.365%, which rounds to the reported 3.4%. So July barely landed inside the 3.4% bucket.
For August to print 3.4% again, the CPI index needs to land roughly between 334.83 and 335.15. That translates to an unadjusted monthly increase of about 0.27% to 0.37%.
Below that range, you are likely looking at 3.3%. Above it, 3.5% starts becoming the winning contract.
That means the difference between the three most important outcomes is being decided by roughly one-tenth of a percentage point in the monthly index.
Polymarket is not really making three wildly different inflation forecasts. It is putting prices on three very tight rounding buckets.
The Fed’s nowcast is right on the line
The Cleveland Fed’s September 2 nowcast has August headline inflation around 3.38% year over year.
That is almost exactly where the Polymarket battle between 3.3% and 3.4% is taking place.
If the model is close to perfect, 3.4% is a reasonable favorite. But it does not leave much room for forecast error, particularly because energy was unusually strong during August.
That is where the 3.5% contract becomes more interesting.
Gasoline is the upside risk
The biggest argument for a hotter print is gasoline.
AAA’s national average was around $4.10 late in August, compared with roughly $3.21 a year earlier. Gas prices also remained above $4 nationally throughout the month.
That matters because CPI measures prices across the month rather than simply comparing the final day of July with the final day of August.
July itself was already an expensive gasoline month, but August stayed elevated from start to finish. Energy inflation was running well above the rest of the basket in July, and another strong gasoline contribution could be enough to push the headline number through the upper edge of the 3.4% rounding range.
Core inflation is pushing in the opposite direction. Core CPI was running around 2.5% annually, with shelter cooling and monthly core inflation around 0.2%.
So the August report is basically a tug-of-war between softer underlying inflation and unusually expensive energy.
With the winning buckets this narrow, it does not take much for either side to determine the headline.
Why 3.5% looks more interesting than 3.2%
Polymarket prices 3.5% at only about 10%, while 3.2% is around 9%.
Those probabilities are almost identical, but the economic paths to get there are not.
A 3.5% print requires monthly inflation to come in somewhat hotter than expected, with gasoline providing an obvious catalyst that has already occurred.
A 3.2% print requires a materially softer month despite record-high August gasoline prices. That probably means core inflation would need to surprise meaningfully to the downside and offset much of the energy contribution.
That makes the upside tail easier for me to justify.
The trade
My favorite contract is 3.5% Yes around 11¢.
The 3.4% contract is probably still the single most likely outcome, but at nearly 50¢ you are paying a lot for a very narrow landing zone. A monthly CPI move of roughly 0.27% to 0.37% keeps 3.4% alive, while anything just above that range can push the reported number to 3.5%.
At 11¢, I think 3.5% offers the better risk/reward.
You already have a clear source of upside pressure from gasoline, and the Cleveland Fed nowcast sits close enough to the 3.5% boundary that a fairly ordinary forecast miss could get you there. You do not need inflation to suddenly reaccelerate across the entire economy; you need the headline index to come in only modestly hotter than expected.
I would rather pay 11¢ for that possibility than 47–48¢ for the index to land inside the relatively tight 3.4% window.
