Longest Government Shutdown in America Disrupts Economic Data Release

SadaNews - The longest government shutdown in U.S. history has disrupted the release of the jobs report for two months, while the inflation report expected next week is also threatened, deepening uncertainty for the Federal Reserve, which is experiencing unprecedented division in its policies.

The U.S. Bureau of Labor Statistics was scheduled to release the Consumer Price Index data for October on Thursday, but the government shutdown not only postponed the publication, but also halted the collection of field data. The likelihood of the Bureau not releasing the October report in full is increasing.

The Debate on Interest Rate Cuts in December Intensifies

The absence of official reports that policymakers rely on to assess the trajectory of inflation and the labor market will prolong the debate over whether an additional interest rate cut is necessary at the upcoming December meeting. While the monetary policy committee received September data in time for its previous meeting, it has not received the updated jobs report (which it will need to discuss the upcoming interest rate decision).

Even if the government reopens in the coming weeks and data collection resumes, Federal Reserve officials will have to rely on statistics based on later surveys and temporary methods, if they are published at all. While private sector reports provide some alternatives for official jobs data, alternatives for government inflation indicators remain limited in scope.

Consumer prices and the core Consumer Price Index (which excludes food and energy prices) rose by 3% year-on-year in September, lower than previous estimates. The "nowcasting" estimates for the price index published by the Federal Reserve Bank of Cleveland point to a similar outcome for October.

Bloomberg Economics Experts' Opinion:

"Even if the government reopens, it is unlikely that the Bureau of Labor Statistics will be able to collect and process data for October and November before the December open market committee meeting. We believe that the October figures would have paved the way for a rate cut in the last meeting of the year."

- Anna Wong, Stewart Poly, Estelle Oh, Eliza Winger, Chris J. Collins, and Troy Dony, Bloomberg Economics Analysts

Although the Fed cut interest rates in October, Federal Reserve Chair Jerome Powell stated that another cut in December "is not guaranteed." For monetary policymakers concerned about the possibility of inflation accelerating again, the absence of official data provides an additional reason to hesitate before taking any new steps next month.

While the markets are still betting on a rate cut in December, investors are awaiting a series of statements next week from several Federal Reserve officials, including John Williams, Raphael Bostic, Stephen Miran, and Alberto Musalem.