After retail data "exploded," some Federal Reserve officials still remain dovish.

On Friday, the data released showed that the so-called "terrifying data" of US retail sales still indicated that American consumer spending remained resilient. The September retail data was unexpectedly revised upwards, and in addition, retail sales in October continued to grow higher than expected. Subsequently, the market's expectations for rate cuts by the Federal Reserve in December and 2025 significantly cooled. Nevertheless, on Friday, some Fed officials still expressed confidence in inflation falling back to target. In the US bond market, traders have already started pricing in expectations for "re-inflation." They predict that as inflation continues to be sticky and a series of policies implemented by Trump after taking office including tax cuts, expelling immigrants, and imposing tariffs, known as the "MAGA policies" may push "re-inflation" to become a reality. The yield on the 10-year US Treasury bonds may even approach 5%, thereby affecting volatile assets such as stocks. The "CME FedWatch Tool" shows that after the release of rising CPI, PPI, and strong retail sales data, the probability of the Fed pausing rate cuts in December rose from less than 30% to close to 40%. It also indicates a bet that the Fed may only cut rates twice next year, rather than the previously expected four cuts indicated before this week's inflation and retail data were released. However, on Friday, some Fed officials spoke confidently about inflation falling back to target. Some officials still expect a rate cut in December, with a further cut of one percentage point next year that is, the usual four cuts of 25 basis points. Boston Fed President Susan Collins stated that she expects inflation to return to the central bank's target of 2%, despite possible monthly fluctuations in the data. Collins told reporters on Friday, "I see a strong, sustainable return path to 2%. There may be imbalances, there may be continued turbulence." Collins reiterated that she believes there will not be any new price pressures that would push core prices higher, and housing inflation that drives up core prices may take some time to dissipate. Collins stated earlier on Friday that monetary policy is still restrictive, and a rate cut in December is still possible, but the final decision will be based on data. Chicago Fed President Austan Goolsbee, in an interview with foreign media, stated that he expects the Fed to cut rates by another 25 basis points this year, and to cut rates by a further one percentage point next year. According to the September dot plot forecast, Goolsbee predicts that the Fed's policy rate will drop to 4.4% by the end of this year, and further to 3.4% by the end of next year. He believes that this rate cut path aligns with the expectations of the Fed's 19 policy makers and may create a more favorable monetary policy environment for economic growth. Goolsbee stated that as long as the inflation rate continues to decline towards the central bank's 2% target, rates will "significantly" decline over the next 12-18 months. Goolsbee added that rates are still restrictive, so there is still room to lower borrowing costs to a more neutral level. He also stated that the current inflation rate is "too high" and cannot be sustained at its current level in the long term; however, he cautioned against viewing strong economic growth as a sign of overheating. Overall, Fed policy makers are not in a rush to reduce borrowing costs. Several Fed officials, including Powell, still argue that considering the strength of the economy, further rate cuts should be cautious and gradual.