Daily Market Mispricings: 2 Economy Events Where We Disagree With Polymarket — May 23, 2026

TL;DROn May 23, 2026, Naly’s clearest economy disagreement is the Fed path: we price a December 2026 cut at 60c versus Polymarket’s 28c, and an October cut at 52c versus 18c. The sharpest reason is timing mismatch: traders are overweighting today’s energy-led inflation scare and underweighting the Fed’s own easing path plus a gradually softer labor market into year-end.

Polymarket is still leaning toward a no-cut story across late-2026 Fed contracts. We disagree on the answer itself, not just the confidence. Our view is that the market is anchoring too hard to the latest inflation scare and the April 28-29, 2026 FOMC minutes, while underweighting how policy usually evolves once energy shocks fade, labor slack builds, and the Fed’s own projected path already points lower than today’s target range.

Key Takeaways

Naly flips both selected Fed contracts to YES, while Polymarket’s top answer is NO in both cases.

The core mispricing is about timing, not direction of inflation headlines: traders may be treating a transitory energy shock like a permanent inflation regime.

The March 17-18, 2026 Fed projections still imply a lower year-end policy rate than the current 3.50%-3.75% range.

April 2026 CPI was hot, but the composition mattered: energy drove a large share of the upside while labor data kept softening at the margin.

October offers the bigger fair-value edge, but December is the cleaner macro setup.

2 Mispricings at a Glance

Event Snapshot

Fed rate cut by December 2026 meeting?

YES Resolves December 9, 2026 Open 74/100 confidence

Polymarket Top Answer NO 72%

Naly Top Answer YES 60%

Max Payout if Correct +72c

0c 50c $1.00

Polymarket Naly

Why we disagree: Market is pricing the latest inflation scare as durable, while we think the Fed’s own path and softer labor backdrop make one cut by December more likely than not.

Event Snapshot

Fed rate cut by October 2026 meeting?

YES Resolves October 28, 2026 Open 76/100 confidence

Polymarket Top Answer NO 82%

Naly Top Answer YES 52%

Max Payout if Correct +82c

0c 50c $1.00

Polymarket Naly

Why we disagree: The market is extrapolating April hawkishness too far forward; we think slower jobs momentum and fading shock inflation can create an autumn easing window.

How to read this: Polymarket Top Answer and Naly Top Answer show the final answer each side sees as most likely. Max Payout if Correct shows the gross upside from the current quote to the $1 settlement if the selected contract side wins. The horizontal graph still shows where that selected side sits on a 0c to $1 range for Polymarket versus Naly.

Event 1

Fed rate cut by December 2026 meeting?

ForecastContract · YESResolves December 9, 2026Open74/100 confidence

+72c

Max Payout if Correct

Polymarket Top Answer NO 72%

Naly Top Answer YES 60%
Trade on Polymarket →

Market is pricing the latest inflation scare as durable, while we think the Fed’s own path and softer labor backdrop make one cut by December more likely than not.

Causal Chain

Cause Cause bullet: April inflation looked hot because energy prices surged and pushed headline CPI higher.

↓

Effect Effect bullet: Traders updated toward a longer hold or even hike path, crowding out the possibility of any 2026 easing.

↓

Projection Projection bullet: If that energy impulse fades while job creation stays modest, the Fed can still deliver a single cut by December without needing a recession.

Key Factors

| Factor
▲ | The Fed’s March 17-18, 2026 Summary of Economic Projections showed a median year-end 2026 fed funds rate of 3.4%, below the current 3.50%-3.75% target range.
▲ | April 28-29 FOMC minutes were hawkish at the margin, but they described a conditional reaction function: tighten if inflation stays high, ease if disinflation resumes or labor weakness becomes clearer.
▲ | April 2026 CPI rose 0.6% month over month and 3.8% year over year, but energy accounted for over 40% of the monthly increase.
▲ | Core CPI at 2.8% year over year is still above target, yet far less alarming than the headline move that dominated the market narrative.
▼ | April payroll growth of 115,000 and rising involuntary part-time work point to slower labor demand, which is exactly the kind of drift that makes a late-year insurance cut plausible.
▼ | The market may be overweighting the Fed’s desire to protect credibility today and underweighting how much time exists between late May and the December 8-9, 2026 meeting.

Bayesian Calculation

Base rate: Start from the market’s 28% YES baseline for a December cut.

Positive update: The March SEP’s 3.4% median year-end path and softer labor momentum push the probability up materially.

Negative update: April’s energy-led CPI reacceleration and hawkish minutes cap conviction and keep this far from a slam dunk.

Naly estimate: 60% YES, or 60c fair value.

Alternative explanation: The cleanest bearish case is that the market is simply right because the Fed cares more about inflation persistence than modest labor cooling. If energy stays high long enough to bleed into services inflation and expectations, December can easily remain a hold.

What Would Make Us Wrong

We are wrong if the next several inflation prints show broadening price pressure beyond energy, especially in shelter and core services, or if payrolls and wages reaccelerate enough that labor weakness never becomes policy-relevant. We would also downgrade quickly if Fed communication drops the easing bias entirely over the summer.

Fresh Checks

Federal Reserve projections from the March 17-18, 2026 meeting

FOMC minutes from April 28-29, 2026

BLS April 2026 CPI release

BLS April 2026 Employment Situation

Event 2

Fed rate cut by October 2026 meeting?

ForecastContract · YESResolves October 28, 2026Open76/100 confidence

+82c

Max Payout if Correct

Polymarket Top Answer NO 82%

Naly Top Answer YES 52%
Trade on Polymarket →

The market is extrapolating April hawkishness too far forward; we think slower jobs momentum and fading shock inflation can create an autumn easing window.

Causal Chain

Cause Cause bullet: The market is treating the April inflation shock and hawkish Fed rhetoric as if they eliminate the autumn easing window.

↓

Effect Effect bullet: October YES is being priced like a tail event instead of a live scenario.

↓

Projection Projection bullet: If energy pressure moderates and labor data keep cooling through summer, October becomes the first plausible meeting for a face-saving cut.

Key Factors

| Factor
▲ | October is the higher-variance contract because it requires the adjustment to arrive sooner, but that does not make 18% a sensible price.
▲ | The March SEP still points to a lower end-2026 policy rate, which means at least one cut remains central enough inside the Fed to matter.
▲ | April payroll growth was only 115,000, unemployment stayed at 4.3%, and part-time-for-economic-reasons workers increased, all of which argue against a perpetually hawkish hold.
▲ | The April minutes showed a split reaction function rather than a one-way hike commitment; some participants still tied cuts to clearer disinflation or labor weakness.
▲ | Reuters-reported economist surveys and market commentary have turned more hawkish recently, which may itself create the mispricing by pushing consensus too far off the medium-term path.
▲ | October is where timing disagreement matters most: if the economy weakens gradually rather than suddenly, the first cut can arrive earlier than markets now imply.

Bayesian Calculation

Base rate: Start from the market’s 18% YES probability for a cut by October.

Positive update: The Fed’s projected path, softer jobs trend, and the possibility that energy inflation fades by late summer all move the odds up sharply.

Negative update: Sticky core inflation and the risk that policymakers keep signaling caution into the fall prevent a high-confidence call.

Naly estimate: 52% YES, or 52c fair value.

Alternative explanation: The main alternative is that October is simply too early. Under that view, the Fed eventually cuts in December, but only after it gets several extra months of disinflation evidence and after leadership avoids risking another inflation surprise too close to year-end.

What Would Make Us Wrong

We are wrong if summer inflation remains broad and sticky, if unemployment refuses to rise at all, or if the Fed begins openly reframing the next likely move as another hike instead of a hold-to-cut sequence. Any sustained oil shock that keeps headline inflation elevated into September would also damage the October case first.

Fresh Checks

Federal Reserve press conference materials for March 18, 2026

FOMC minutes from April 28-29, 2026

BLS April 2026 CPI release

Reuters summary of the shifting Fed consensus

Conclusion

For May 23, 2026, the economy board’s clearest disagreement is not whether inflation looks hot right now; it is whether traders are extrapolating that heat too far into late 2026. The next catalysts to watch are the June 5 labor report, the June 10 CPI release, summer energy-price behavior, and whether Fed language keeps an easing option alive into the fall. If those data soften even modestly, the October and December cut contracts should reprice higher.

Methodology

Naly’s mispricing process starts with the live contract side being quoted, then converts our separate probability estimate on that same side into a fair cents price for a $1 binary contract. We compare that fair value against the market entry price, score the component gap, and then force ourselves to explain the disagreement causally rather than narratively. Our historical calibration and resolved-market performance are tracked at /track-record.

Disclaimer

This article reflects Naly’s probability estimates as of May 23, 2026, not certainty about future outcomes. Prediction markets can move quickly, new data can invalidate the thesis, and none of this is investment advice.