18 Aug 25 US Stagflation Scenario Risk Dashboard

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 Data as of 15 Aug 2025

Sources: CPI YoY from BLS API (CUSR0000SA0; fallback FRED CPIAUCSL). Breakevens (T5YIE, T10YIE), TIPS (DFII5, DFII10), curve (DGS2, DGS10), and HY OAS (BAMLH0A0HYM2) from FRED.

Takeaway: The probability mix reflects the current balance of risks across inflation, growth, and credit. A higher soft-landing share aligns with firm real yields and contained credit spreads; a tilt toward stagflation rises when breakevens and OAS widen while the curve re-inverts.

Compare with 11 Aug Probabilties (below) A soft-landing muddle-through scenario now seems probably. 

For methodology and explanation of inflation scenarios see: https://ngtiankhean.blogspot.com/2025/08/usa-stagflation-risk-dashboard-11-aug.html 

Breakeven Inflation and 5y5y Forward
Insight: 5Y breakevens proxy near-term inflation expectations and move with energy and supply shocks. 10Y breakevens anchor longer-run inflation views; stability near 2 percent suggests credibility of the Fed target. A rising 5y5y forward signals investors expect inflation pressures to persist beyond the near term. Watch for breaks above 2 to 2.5 percent as a warning that inflation psychology is drifting higher.

CPI YoY (Headline CPI-U, SA)

Insight: Headline CPI YoY tracks realized inflation. Sustained CPI YoY above 2 percent keep the policy bias restrictive; cooling toward 2 percent supports a patient easing path. Compare CPI trends with breakevens to gauge credibility and risk of surprise re-acceleration.

TIPS Real Yields
Insight: Positive and rising TIPS real yields tighten financial conditions and weigh on interest-sensitive growth. Falling real yields can cushion growth but may also accompany rising inflation risk if breakevens lead the move.

2s10s Yield Curve Spread
Insight: A deeply inverted curve signals restrictive policy and elevated recession risk. Re-steepening from inversion can be a late-cycle signal; if it occurs via rising long rates alongside sticky inflation, stagflation risk increases.

Insight: HY spreads summarize credit risk appetite. Tight spreads indicate benign default expectations and support soft-landing narratives; a sharp, sustained widening is an early warning of growth stress and tightening financial conditions.
















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