US November inflation below expectations, rising unemployment rate suggests rate cut room is underestimated

【BiTu】U.S. November inflation data released, and the results were shocking—far below economists’ forecasts. Meanwhile, the unemployment rate unexpectedly rose, and this combination of data caught the market off guard.

Manulife Investment Management’s Head of U.S. Rates and Mortgage Trading, Michael Lorizio, recently made a judgment: although the federal government shutdown has increased informational noise, the current space for inflation to continue rising significantly beyond expectations is actually limited. In other words, the data has already returned to a relatively manageable range.

The key point is—if the labor market continues to deteriorate, with the monthly unemployment rate rising by 0.1 percentage points, then the market may be severely underestimating the potential for rate cuts next year. At that time, the central bank’s policy adjustment room could be much larger than currently imagined. This is a signal worth paying attention to for overall asset allocation expectations.