Fed officials release important signals: The truth behind inflation data and the economic outlook for next year

[Chain News] Recently, a key figure from the Fed has put forward several interesting viewpoints. The inflation data for November looks quite good, but there may be some “water content” hidden behind it—the government shutdown in the first half of October and November directly disrupted the rhythm of data collection, which may have led to an underestimation of the statistical data.

How should we specifically view this? The CPI year-on-year growth rate for November released by the Bureau of Labor Statistics is 2.7%, which seems quite ideal. However, if we consider the difficulty of measuring the data, the adjusted real level may be closer to 2.9% or even 3.0% — this is the level that market forecasters generally agree upon.

What's more interesting is this official's view on interest rates. She believes that the current neutral interest rate level is severely underestimated, meaning that the “comfortable rate” that the economy can bear is much higher than we think. The logic behind this view is clear: the economy itself already has enough momentum and can maintain steady growth next year.

Of course, the neutral interest rate cannot be measured directly; it can only be inferred from the actual performance of the economy. However, this signal is indeed worth paying attention to—if the economy remains strong next year, then the room for interest rate cuts may not be as large as the market previously expected. This will impact the entire asset allocation landscape.