Before the CPI release, Federal Reserve Board Member Mullan questioned the stubbornness of inflation, and the market re-priced the Federal Reserve's interest rate path.

As the US Consumer Price Index (CPI) for November is about to be released, Federal Reserve Board member Stephen Milan publicly challenged the mainstream narrative that “inflation remains significantly above target,” prompting a reassessment of future interest rate paths. The timing of these remarks coincides with investors closely monitoring macroeconomic data for its potential impact on Fed policy, the dollar’s trajectory, and risk assets such as Bitcoin.

According to the CME FedWatch Tool, the market currently prices in over a 75% probability that the Federal Reserve will hold interest rates steady at the January 2026 meeting, indicating that expectations for prolonged tightening are cooling. Milan believes that the underlying inflation level is actually very close to the Fed’s 2% target, and that the current “overshoot” in inflation is more due to lagging and biased statistical measures rather than demand overheating.

He specifically pointed out that housing inflation is systematically overestimated in core indicators. Since housing costs in the PCE index cover all tenants and rents are only adjusted upon renewal, this metric naturally lags real-time market rent changes, thereby amplifying current inflation readings. Meanwhile, Milan also criticized the management fees within the core non-housing services category, which are linked to asset size and mechanically boost inflation data during stock market rallies, even as consumers’ actual burdens are decreasing.

Regarding commodity inflation, Milan also questioned the common view that “tariffs are driving inflation.” He cited research indicating that tariff costs are mainly borne by exporters and have limited impact on consumer prices, estimated at around 0.2%, which is closer to short-term noise rather than a persistent inflation shock.

Analysis from Bloomberg Economics also supports this view, with forward-looking indicators suggesting that deflationary pressures could re-emerge in the coming months. As a result, the market has begun to debate whether the Fed is still responding to inflation issues left over from 2022 rather than the current real price environment. The upcoming CPI data will be a key variable in validating this perspective and influencing expectations for monetary policy in 2026.