# Core inflation in May 2026 (Core CPI YoY)

May 2026

Updated: April 29, 2026

Category: Economics

Tags: Inflation

HTML: /markets/economics/inflation/core-inflation-in-may-2026-core-cpi-yoy/

## Short Answer

**Key takeaway.** Both the **model** and the **market** expect core inflation in May 2026 to be above **2.1%**, with no compelling evidence of mispricing.

## Key Claims (January 2026)

**- - Strong wage growth in supercore services consistently exceeded 4.0% in 2025.** - **Market** expects policy rates to remain above the Fed's neutral projection.
- Core goods pricing did not show structural inflation during 2025.
- Housing disinflation continued, with ZORI growth below **3.5%** in late 2024.
- Overall core inflation faces upward pressure from services wage growth.
- Disinflation in goods and housing likely caps highest core inflation levels.

### Why This Matters (GEO)

- AI agents extract claims, not arguments.
- Improves citation probability in summaries and answer cards.
- Enables fact stitching across multiple sources.

## Executive Verdict

**Key takeaway.** **Model** estimates **98.8%** versus 99c **market** price, a -0.2pp gap, suggesting slight overvaluation given persistent wage growth.

### Who Wins and Why

| Outcome | Market | Model | Why |
| --- | --- | --- | --- |
| Above 2.8% | 24.0% | 18.5% | Persistent strong wage growth in supercore services suggests continued upward pressure on core inflation. |
| Above 2.6% | 57.0% | 54.3% | Strong wage growth in supercore services will likely keep core inflation elevated into 2026. |
| Above 2.7% | 49.0% | 46.7% | Expectations for higher policy rates into 2026 indicate persistent upward pressure on core inflation. |

## Model vs Market

| Outcome | Market Probability | Octagon Model Probability |
| --- | --- | --- |
| Above 2.8% | 24.0% | 18.5% |
| Above 2.6% | 57.0% | 54.3% |
| Above 2.7% | 49.0% | 46.7% |
| Above 2.4% | 88.0% | 86.3% |
| Above 2.2% | 87.0% | 95.4% |
| Above 3.5% | 7.0% | 5.5% |
| Above 3.3% | 4.0% | 5.5% |
| Above 3.0% | 14.0% | 10.8% |
| Above 3.4% | 4.0% | 5.5% |
| Above 2.5% | 75.0% | 72.3% |
| Above 2.9% | 11.0% | 10.8% |
| Above 3.1% | 4.0% | 5.5% |
| Above 3.2% | 3.0% | 5.5% |
| Above 2.3% | 96.0% | 95.4% |
| Above 2.1% | 99.0% | 98.8% |

- Expiration: June 10, 2026

## Market Behavior & Price Dynamics

This prediction market has exhibited no price movement, remaining completely static since its inception. The price has been fixed at a 99.0% probability, indicating an extremely high expectation for the "YES" outcome. The chart shows a perfectly sideways trend with no volatility, spikes, or drops whatsoever. Given the absence of any price changes, there are no significant market movements to analyze or attribute to external events or news.

The most critical factor in this market is the complete lack of trading activity, with a total volume of zero contracts traded across all data points. This indicates that the market is entirely illiquid. The 99.0% price is not a reflection of collective market sentiment or trader consensus, as no transactions have taken place to validate this price level. It is likely the initial price set by the market creator or an automated market maker.

Consequently, no meaningful support or resistance levels have been established. The chart does not suggest strong market conviction but rather a total absence of participation. The price represents a placeholder or an initial condition, not an actively debated forecast by traders. Without any trading volume, the price data does not provide insight into the market's evolving expectations for this economic outcome.

## Significant Price Movements

### Outcome: Above 2.4%

#### 📈 April 28, 2026: 9.0pp spike

Price increased from 79.0% to 88.0%

**What happened:** No supporting research available for this anomaly.

### Outcome: Above 2.2%

#### 📉 April 21, 2026: 9.0pp drop

Price decreased from 96.0% to 87.0%

**What happened:** No supporting research available for this anomaly.

## Contract Snapshot

This market resolves to YES if the Consumer Price Index (CPI) for All Urban Consumers: All Items less Food and Energy increases by more than 2.7% in the twelve months ending May 2026, as reported by the Bureau of Labor Statistics (BLS). If the increase is 2.7% or less, the market resolves to NO. Trading closes on June 10, 2026, at 8:25 AM EDT, with projected payout by 11:00 AM EDT. A federal government shutdown impacting BLS data reliability will extend the market's expiration date.

## Market Discussion

Limited public discussion available for this market.

## Market Data

| Contract | Yes Bid | Yes Ask | Last Price | Volume | Open Interest |
| --- | --- | --- | --- | --- | --- |
| Above 2.1% | 95% | 100% | 99% | $100 | $100 |
| Above 2.2% | 95% | 100% | 87% | $823 | $823 |
| Above 2.3% | 88% | 97% | 96% | $200 | $200 |
| Above 2.4% | 80% | 88% | 88% | $1,336.84 | $862 |
| Above 2.5% | 71% | 81% | 75% | $405 | $246 |
| Above 2.6% | 57% | 68% | 57% | $2,119 | $1,194 |
| Above 2.7% | 47% | 53% | 49% | $1,733.64 | $1,714.25 |
| Above 2.8% | 24% | 34% | 24% | $2,195 | $1,460 |
| Above 2.9% | 11% | 17% | 11% | $367 | $167 |
| Above 3.0% | 6% | 13% | 14% | $639.26 | $451.26 |
| Above 3.1% | 0% | 6% | 4% | $305 | $237 |
| Above 3.2% | 0% | 5% | 3% | $206 | $105 |
| Above 3.3% | 0% | 3% | 4% | $647 | $643 |
| Above 3.4% | 0% | 3% | 4% | $603 | $597 |
| Above 3.5% | 0% | 4% | 7% | $656 | $558 |

## How Do Market Rate Expectations Diverge from Fed Projections?

Market-Implied Dec 2025 SOFR | 4.88% [[^]](https://www.barchart.com/futures/quotes/SQZ25) |
Fed's Longer Run Rate Projection | 2.6% [[^]](https://fred.stlouisfed.org/series/FEDTARMDLR) |
Divergence (Market vs. Fed) | 2.28 percentage points higher [[^]](https://www.barchart.com/futures/quotes/SQZ25) |

**Market and Federal Reserve projections for future rates diverge significantly**

**Market** and Federal Reserve projections for future rates diverge significantly. Recent **market** data, specifically from the December 2025 SOFR futures contract, implies a 3-month SOFR rate of approximately **4.88%** for early 2026 [[^]](https://www.barchart.com/futures/quotes/SQZ25). This figure reflects traders' collective expectation for the short-term policy rate by the end of 2025. In stark contrast, the Federal Reserve's official 'longer run' federal funds rate projection, as published in its Summary of Economic Projections (SEP), has consistently held a median of **2.6%** [[^]](https://fred.stlouisfed.org/series/FEDTARMDLR).

**Market** expectations for 2026 policy rates are substantially higher than the Fed's. The current **market**-implied policy rate expectation for early 2026 thus stands 2.28 percentage points above the Federal Reserve's 'longer run' projection [[^]](https://www.barchart.com/futures/quotes/SQZ25). This substantial difference indicates a divergence in outlook between **market** participants and the Federal Reserve regarding the likely trajectory of interest rates throughout 2024 and 2025, with the **market** anticipating policy remaining tighter for a longer duration than what the Federal Reserve considers its long-run equilibrium rate.

## Did Supercore Services Wage Growth Stay Above 4.0% in 2025?

Q1 2025 ECI Wage Growth (Professional & Business Services) | 4.2% [[^]](https://fred.stlouisfed.org/series/CIS202540A000000I) |
Q3 2025 ECI Wage Growth (Professional & Business Services) | 4.8% [[^]](https://fred.stlouisfed.org/series/CIS202540A000000I) |
Consensus Forecasts for ECI Wage Growth > 4.0% | Not explicitly available beyond 2025 [[^]](https://ferrantecapitaladvisers.com/insights/march-2026-pce-preview-supercore-fed-pause/) |

**Annualized wage growth in supercore services consistently exceeded 4.0% in 2025**

Annualized wage growth in supercore services consistently exceeded **4.0%** in 2025. The Employment Cost Index (ECI) for private industry workers in professional and business services, a key component of the 'supercore' services sector, maintained an annualized wage growth rate above **4.0%** throughout 2025. Specifically, growth was **4.2%** in the first quarter, rose to **4.6%** in the second quarter, peaked at **4.8%** in the third quarter, and remained robust at **4.4%** in the fourth quarter [[^]](https://fred.stlouisfed.org/series/CIS202540A000000I). These figures represent seasonally adjusted annual rates of change from the preceding quarter. Broader private industry service-providing workers also demonstrated strong wage and salary changes, with annualized rates reported around **4.06%** in Q1, **4.88%** in Q3, and **4.47%** in Q4 [[^]](https://www.bls.gov/news.release/archives/eci_04302025.htm).

Consensus forecasts do not project persistent supercore wage growth above **4.0%** beyond 2025. The available research does not contain explicit consensus forecasts indicating that ECI wage growth for the 'supercore' services sector will consistently remain above a **4.0%** annualized rate past the reported 2025 figures. While economic analyses frequently reference actual wage data and "supercore" inflation, specific forward-looking projections or consensus views on ECI wage growth for service-providing industries persisting above this threshold were not provided in the research [[^]](https://ferrantecapitaladvisers.com/insights/march-2026-pce-preview-supercore-fed-pause/). Therefore, no explicit consensus forecasts are available to suggest this metric will remain above **4.0%** beyond 2025.

## Did ZORI Year-Over-Year Growth Re-accelerate Above 3.5% in H2 2024?

ZORI YOY Growth (Dec 2024) | 3.3% [[^]](https://www.zillow.com/research/january-2025-rent-report-34811/) |
Re-acceleration Threshold | 3.5% [[^]](https://beautifydata.com/us-zillow-housing-inventory/us-trend-of-zori-smooth-seas) |
H2 2024 ZORI Trend | Did not re-accelerate above 3.5% [[^]](https://beautifydata.com/us-zillow-housing-inventory/us-trend-of-zori-smooth-seas) |

**Rent growth remained below the critical 3.5% threshold in late 2024**

Rent growth remained below the critical **3.5%** threshold in late 2024. The Zillow Observed Rent Index (ZORI) year-over-year growth rate was **3.3%** by December 2024, consistently reported for all homes and multifamily units [[^]](https://www.zillow.com/research/january-2025-rent-report-34811/). This rate stayed below the **3.5%** re-acceleration threshold during the second half of 2024, indicating no significant increase above that level [[^]](https://www.zillow.com/research/january-2025-rent-report-34811/).

Softening demand and increased supply moderated rent growth trends. Throughout the summer of 2024, Zillow's rental **market** reports noted a softening of rental demand and a continued deceleration of annual rent growth, primarily due to an increase in apartment completions [[^]](https://www.zillow.com/research/august-2024-rent-report-34353/). By early 2025, rent growth stabilized at the **3.3%** rate observed in December 2024 [[^]](https://www.zillow.com/research/january-2025-rent-report-34811/). This trend suggests that the disinflationary impulse from housing, as measured by ZORI, was not exhausted by a re-acceleration above **3.5%** during the latter half of 2024.

## Did Onshoring Lead to Core Goods Inflation in 2025?

Core Goods Change 2025 | -0.4 percent [[^]](https://www.bls.gov/opub/ted/2026/consumer-price-index-2025-in-review.htm) |
Core Goods Change 2024 | -0.7 percent [[^]](https://www.bls.gov/opub/ted/2026/consumer-price-index-2025-in-review.htm) |
Trade Frictions Impact on CPI | Limited and temporary [[^]](https://www.minneapolisfed.org/article/2026/tariffs-cant-explain-rising-goods-inflation), [[^]](https://www.federalreserve.gov/econres/notes/feds-notes/detecting-tariff-effects-on-consumer-prices-in-real-time-part-II-20260408.html) |

**Core goods pricing did not show a structural shift to inflation during 2025**

Core goods pricing did not show a structural shift to inflation during 2025. Based on available research, there is no evidence to suggest a structural shift in core goods pricing from deflation to inflation due to onshoring and trade frictions. Specifically, the "Commodities Less Food and Energy Commodities" sub-component did not register a positive year-over-year change for at least three consecutive quarters during 2025. The index for commodities less food and energy actually declined by 0.4 percent in 2025, following a 0.7 percent decline in 2024, indicating that this sub-component remained in deflationary territory on average throughout the year [[^]](https://www.bls.gov/opub/ted/2026/consumer-price-index-2025-in-review.htm).

Trade friction impact on consumer prices is generally minor and temporary. Analyses by Federal Reserve banks indicate that the impact of trade frictions, such as tariffs, on consumer prices tends to be relatively small and temporary [[^]](https://www.minneapolisfed.org/article/2026/tariffs-cant-explain-rising-goods-inflation), [[^]](https://www.federalreserve.gov/econres/notes/feds-notes/detecting-tariff-effects-on-consumer-prices-in-real-time-part-II-20260408.html). These factors are not considered a major driver of overall goods inflation, which challenges the premise that onshoring and trade frictions were leading to a significant structural inflationary shift in core goods prices during the 2025 period.

## Will U.S. Neutral Interest Rate Exceed 1.0% by Mid-2025?

HLW Model Real Neutral Rate | Around 0.5% to 0.7% in recent years [[^]](https://www.newyorkfed.org/research/policy/rstar?_ppp=f0ccfb463e), [[^]](https://www.newyorkfed.org/research/policy/rstar), [[^]](https://www.newyorkfed.org/medialibrary/media/research/economists/williams/HLW_2023) |
Real-Time HLW Estimate Trend | Suggests real-time calculations can deviate from later-revised estimates [[^]](https://libertystreeteconomics.newyorkfed.org/2025/03/comparing-apples-to-apples-synthetic-real-time-estimates-of-r-star/), [[^]](https://nyfed.org/43g6K4b) |
Implied Nominal Neutral Rate | 3.0% or higher if real neutral rate sustainably exceeds 1.0% [[^]](https://www.clevelandfed.org/publications/economic-commentary/2025/ec-202508-neutral-interest-rates-and-monetary-policy-stance) |

**Academic and Federal Reserve models face scrutiny over r-star estimates**

Academic and Federal Reserve models face scrutiny over r-star estimates. By mid-2025, these models, particularly the Holston-Laubach-Williams (HLW) **model**, will likely undergo continued examination regarding their neutral rate of interest (r-star) projections. Historically, the HLW **model** for the U.S. has indicated a long-run real natural rate of approximately **0.5%** to **0.7%** in recent years [[^]](https://www.newyorkfed.org/research/policy/rstar?_ppp=f0ccfb463e), [[^]](https://www.newyorkfed.org/research/policy/rstar), [[^]](https://www.newyorkfed.org/medialibrary/media/research/economists/williams/HLW_2023). Economists and policymakers are actively discussing a potentially higher r-star, citing factors such as government spending, productivity, and global capital flows [[^]](https://www.reuters.com/markets/us/fed-meets-elusive-r-star-still-packs-punch-2025-12-08/), [[^]](http://data.newyorkfed.org/newsevents/speeches/2024/wil240703). However, a definitive revision showing a long-run real neutral rate sustainably above **1.0%** remains uncertain based on currently available information.

Understanding r-star is complex, with real-time estimates varying significantly. Real-time calculations of r-star often diverge from ex-post revised estimates. Research published in March 2025, titled "Comparing Apples to Apples: 'Synthetic Real-Time' Estimates of R-Star," highlights these potential differences [[^]](https://libertystreeteconomics.newyorkfed.org/2025/03/comparing-apples-to-apples-synthetic-real-time-estimates-of-r-star/), [[^]](https://nyfed.org/43g6K4b). This suggests that real-time indicators might point to an elevated neutral rate as new data emerges, potentially before official **model** revisions are formally adopted. Federal Reserve officials are continuously assessing r-star's implications for monetary policy, as shown by speeches in 2024 and 2025, such as "R-Star: A Global Perspective" (July 2024) and "Neutral Interest Rates and the Monetary Policy Stance" (August 2025) [[^]](http://data.newyorkfed.org/newsevents/speeches/2024/wil240703), [[^]](https://www.clevelandfed.org/publications/economic-commentary/2025/ec-202508-neutral-interest-rates-and-monetary-policy-stance).

A real neutral rate above **1.0%** directly impacts the nominal neutral rate. Should the long-run real neutral rate indeed be revised to sustainably exceed **1.0%**, it would directly influence the nominal neutral rate. Assuming the Federal Reserve maintains its **2%** inflation target, a real rate sustainably above **1.0%** would imply a nominal neutral rate of **3.0%** or higher [[^]](https://www.clevelandfed.org/publications/economic-commentary/2025/ec-202508-neutral-interest-rates-and-monetary-policy-stance). For example, a **1.25%** real rate combined with the **2.0%** inflation target would result in a **3.25%** nominal neutral rate. The evolving consensus surrounding r-star is thus crucial for establishing the appropriate direction and stance of monetary policy [[^]](https://resources.newyorkfed.org/newsevents/speeches/2025/wil250825), [[^]](https://www.clevelandfed.org/publications/economic-commentary/2025/ec-202508-neutral-interest-rates-and-monetary-policy-stance).

## What Could Change the Odds

**Key takeaway.** Catalyst analysis unavailable.

## Key Dates & Catalysts

- **Expiration:** June 17, 2026
- **Closes:** June 10, 2026

## Decision-Flipping Events

- Catalyst analysis unavailable.

## Related Research Reports

- [China overtakes USA’s economy by 2030?](/markets/economics/growth/china-overtakes-usa-s-economy-by-2030/)
- [Costco raises hot dog combo price?](/markets/economics/inflation/costco-raises-hot-dog-combo-price/)
- [Next Fed rate hike?](/markets/economics/fed/next-fed-rate-hike/)
- [US gas prices on Apr 29, 2026](/markets/economics/oil-and-energy/us-gas-prices-on-apr-29-2026/)

## Historical Resolutions

**Historical Resolutions:** 20 markets in this series

**Outcomes:** 5 resolved YES, 15 resolved NO

**Recent resolutions:**

- KXCPICOREYOY-26MAR-T4.0: NO (Apr 10, 2026)
- KXCPICOREYOY-26MAR-T3.9: NO (Apr 10, 2026)
- KXCPICOREYOY-26MAR-T3.8: NO (Apr 10, 2026)
- KXCPICOREYOY-26MAR-T3.7: NO (Apr 10, 2026)
- KXCPICOREYOY-26MAR-T3.6: NO (Apr 10, 2026)

## Disclaimer

This content is for informational and educational purposes only and does not constitute financial, investment, legal, or trading advice.
Prediction markets involve risk of loss. Past performance does not guarantee future results.
We are not affiliated with Kalshi or any prediction market platform. Market data may be delayed or incomplete.

### Data Sources & Model Transparency

**Data Sources:** Octagon Deep Research aggregates information from multiple sources including news, filings, and market data.

**Freshness:** Analysis is generated periodically and may not reflect the latest developments. Verify critical information from primary sources.