Tuesday's inflation report looks like it'll be a snoozefest, at least if you believe the consensus. Wall Street economists expect the annual inflation rate to stay put at 2.7% for December, with the monthly number ticking up 0.3%. Nothing scary there.

The Federal Reserve Bank of Cleveland's Inflation Nowcasting model is even more optimistic, projecting just 0.2% month-over-month and 2.6% year-over-year. Core inflation (which strips out volatile food and energy) is expected to nudge slightly higher from 2.6% to 2.7% annually, with a 0.3% monthly gain.

Prediction Markets Are Really, Really Confident

Over on Polymarket, traders are basically yawning at the idea of hot inflation. There's an 89% probability priced in that annual inflation comes in at 2.8% or lower. The odds of something spicier? Just 6% for a 2.9% print and a mere 1% chance we hit 3%.

Here's where it gets interesting: when everyone agrees on an outcome, betting against them gets cheap. If you think inflation will surprise to the upside and land at 2.9% or higher, a $100 wager would net you roughly $800. Those are lottery-ticket odds for something that's not exactly impossible.

The monthly inflation picture is slightly less one-sided. A 0.3% reading is the favorite at 37% probability, with 0.2% close behind at 34%. A firmer 0.4% monthly bump carries a 21% chance, while a sharp 0.5% increase sits at just 4%.

Investors Aren't Losing Sleep

Survey data backs up the relaxed vibe. Dennis DeBusschere from 22V Research notes that 33% of investors expect a risk-on reaction to the CPI report, while 45% anticipate something mixed or negligible. Only 21% see a risk-off move coming.

Perhaps most telling: 66% of investors believe core CPI is on a "Fed-friendly glide path," near record highs in the firm's tracking. That's a lot of confidence that inflation is behaving itself.

But not everyone's convinced. Ed Yardeni pointed out that recent inflation data might be wonky thanks to last fall's 43-day government shutdown, which likely messed with the Bureau of Labor Statistics' data collection efforts. That makes Tuesday's CPI and the upcoming PPI releases especially important as the Federal Open Market Committee heads toward its late-January rate decision.

For now, markets are assigning a 95% probability that the Fed keeps rates unchanged at 3.50%–3.75% at the January 28 meeting, according to CME FedWatch. Fed futures continue to fully price in two rate cuts by the end of 2026.

Bank of America Sees Potential for Surprise

Economists at Bank of America, led by Stephen Juneau, are taking a slightly more cautious stance. Their December forecast calls for headline and core inflation to rise 0.4% and 0.3% month-over-month respectively, with both annual rates landing at 2.7%.

Their reasoning? November's numbers were probably artificially soft due to carry-forward imputation and the delayed data collection during the shutdown. December could deliver some "payback," especially in goods prices.

Bank of America still doesn't think inflation is a primary concern for policymakers, but they see risks tilted modestly to the upside. Which means those cheap Polymarket hedges might not be such a crazy idea after all.