Will annual inflation increase by 3.7% in April?

Prediction markets put the probability at 35%: Will annual inflation increase by 3.7% in April. Currently, markets are divided (35% YES, 65% NO). Annual US inflation posts biggest gain in nearly three years in March | Reuters.

What’s Happening

The current prediction market odds for an annual inflation increase by 3.7% in April sit at a 35% YES probability, a steep underdog position that reflects the statistical reality of the current standings. After March’s core PCE reading hit 3.2%—its highest level in nearly three years—the gap to the 3.7% target is a full 0.5 percentage points. That’s a significant spread to close in a single month, especially when the Fed’s preferred gauge has been trending upward at a measured pace. For context, the last time annual inflation jumped by that magnitude in one month was during the post-pandemic supply shock in 2022, a scenario that required a perfect storm of energy spikes and base effects. The current trajectory, driven largely by the Iran war’s impact on gasoline prices, would need an extraordinary acceleration to hit the 3.7% mark, making the 65% NO probability the clear favorite in this matchup. [Reuters, Apr 30]

Recent performance data from March shows the inflation index posted a 0.7% month-over-month gain, a faster clip than the 0.4% pace in February, but still well short of the monthly surge required to push the annual rate to 3.7%. The core PCE—which strips out volatile food and energy—rose to 3.2% annually, unchanged from February’s revised figure, indicating that underlying price pressures are sticky but not accelerating at a breakout pace. The headline figure, which includes energy, hit 3.5% in March, driven by oil briefly touching $126 per barrel. To reach 3.7% in April, the month-over-month increase would need to exceed 0.8%, a level not seen since the early months of the Iran conflict. Historical precedents from the 2022 inflation cycle show that such spikes typically require a new shock—like a refinery outage or a further escalation in the Middle East—rather than a continuation of current trends. [CNN, Apr 30]

Looking ahead, the key variable is whether the Iran war’s impact on gasoline prices will intensify or plateau. The March data already baked in the initial surge from the conflict, and analysts at The Hill note that without food and energy, the core rate held at 3.2%, suggesting the headline number is heavily dependent on oil’s next move. If crude stabilizes or retreats from the $126 peak, the annual inflation increase by 3.7% in April becomes a long shot. However, if the conflict escalates—particularly with disruptions to Persian Gulf shipping lanes—the YES probability could rally. The Fed has already signaled it will keep rates unchanged well into next year, a defensive posture that acknowledges the war’s inflationary pressure but also implies they see the spike as transitory. For now, the 65% NO odds reflect a market that trusts the data trend over the outlier scenario. [The Hill, Apr 30]

Traded on Polymarket — $54K Volume

Lower-volume market on Polymarket ($54K). Wider spreads expected — enter with limit orders and be aware of slippage risk. Currently 35c YES.