The longest government shutdown in US history has disrupted the release of the jobs report for two months, while next week's anticipated inflation report is also under threat, deepening the uncertainty facing the Federal Reserve, which is experiencing an unprecedented division in its direction.
The U.S. Bureau of Labor Statistics was scheduled to release its October Consumer Price Index data on Thursday, but the government shutdown not only delayed publication but also halted field data collection. It is now increasingly likely that the Bureau will not release the full October report.
The debate over an interest rate cut in December intensifies
The absence of official reports, which monetary policymakers rely on to assess the trajectory of inflation and the labor market, will prolong the debate over whether a further interest rate cut is necessary at the upcoming December meeting. While the Monetary Policy Committee received the September data in time for its previous meeting, it has not yet received the updated jobs report (which it will need to discuss the next 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 retrospective surveys and provisional methods, if they are even published at all. While private-sector reports offer some alternatives to official jobs data, alternatives to government inflation indicators remain limited.
Consumer prices and their core index (which excludes food and energy prices) rose 3% year-over-year in September, less than previously estimated. The Cleveland Federal Reserve's real-time price forecast indicates a similar result 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 Federal Open Market Committee meeting in December. We believe that the October figures would have paved the way for an interest rate cut at the final meeting of the year.
Anna Wong, Stuart Ball, Estelle O, Eliza Winger, Chris J. Collins, and Troy Dory, Bloomberg Economics analysts
Although the Federal Reserve cut interest rates in October, Fed Chair Jerome Powell emphasized that another cut in December is not guaranteed. For policymakers concerned about the potential for inflation to accelerate again, the lack of official data provides further reason to hold off on any new action next month.
Although markets are still betting on an interest rate cut in December, investors are awaiting a series of statements next week from a number of Federal Reserve officials, including John Williams, Raphael Bostic, Stephen Mirran and Alberto Musallam.
