Fed official Hamak warned that the US CPI for November may be underestimated due to data distortions related to the government shutdown, making the 12-month inflation figure closer to the actual 2.9%–3.0% range than 2.7%.
This assessment raises doubts about the extent of inflation's "cooling" and reinforces the cautious argument for interest rate cuts, as Hamak suggests that neutral interest rates may be higher than the market believes.
- The CPI for November increased by 2.7% year-on-year, but this figure may be lower than the actual reading.
- Adjusting for measurement difficulties brings the CPI closer to 2.9%–3.0%.
- Hamak doubted the interest rate cut because the neutral interest rate could be higher.
CPI in November: 2.7% YoY may not accurately reflect the situation.
Hamak said the positive inflation data in November may have stemmed from data collection distortions caused by the government shutdown in October and the first half of November, which lowered estimates of 12-month price increases.
The U.S. Bureau of Labor Statistics (BLS) reported that the CPI in November rose 2.7% year-on-year. However, according to revised estimates reflecting the difficulty in measuring, this increase was brought closer to the 2.9% or 3.0% range—the thresholds typically expected by forecasters.
The main implication is that the reliability of the inflation reduction signal may be uncertain, especially when technical factors (distortions) can cause the figures to be lower than reality. This often increases the sensitivity of macroeconomic markets, including risky assets such as cryptocurrencies, to inflation developments and interest rate expectations.
Higher neutral interest rates and continued growth momentum: barriers to interest rate cuts.
Hamak's core concern regarding interest rate cuts is the view that interest rates are more neutral than the widely believed level, while the economy is poised to sustain strong growth next year.
Hamak emphasized that the neutral interest rate cannot be directly observed, but can only be inferred from the state of the economy. If the actual neutral interest rate is higher, the threshold for monetary policy to become "loose" is also higher, making the justification for cutting interest rates less convincing in the context of robust growth.
In this context, market expectations regarding interest rate cuts could come under pressure if subsequent inflation data confirms that the CPI is not as low as initially reported. With cryptocurrencies, changes in risk pricing often closely track interest rate expectations and economic growth strength.
