Government Shutdown Blinds Fed as It Mulls Rate Cuts

Data Blackout Comes at a Critical Time
The Federal Reserve is facing one of its toughest balancing acts yet — deciding whether to cut interest rates without access to key economic data. As the U.S. government shutdown stretches into its second day, agencies responsible for major reports like jobs, inflation, and retail sales have halted operations, leaving policymakers with limited insight into the economy’s direction.

Fed officials are trying to support a slowing labor market without reigniting inflation, but the absence of updated data complicates those efforts. Without the Bureau of Labor Statistics’ monthly jobs report or the Commerce Department’s latest inflation readings, the central bank’s decisions may depend more on estimates and private data — an imperfect substitute when monetary moves carry such high stakes.

A Tough Balancing Act for Powell
Chair Jerome Powell and the Federal Open Market Committee were already weighing the risks of cutting rates too soon against holding them too high for too long. With the economy cooling and prices still elevated, even small missteps could undermine recent progress toward price stability.

Past shutdowns have caused similar data delays, but this one comes at a particularly fragile moment. Inflation remains above the Fed’s 2% target, consumer spending is slowing, and hiring has softened — all while markets anticipate a potential rate cut in the coming months.

Markets Watching Every Move
The shutdown’s timing leaves investors guessing. Wall Street analysts say the lack of data could delay the Fed’s next move or increase volatility in the bond market. Without clear indicators, Powell’s next decision may rely as much on instinct as on statistics — a risky position for the world’s most influential central bank.