The Federal Reserve faces one of its toughest meetings in years this month, forced to make critical interest-rate decisions without the usual government data guiding its hand.
Due to the blackout of critical data inflation and jobs data from the federal government shutdown, a precarious economic mix of sticky inflation and softening job growth from private sources are being studied.
“This is probably the worst time for the Fed to be flying blind,” Kenneth Kuttner, a professor of economics at Williams College who studies central bank policy, told ABC News.
The shutdown which began Oct. 1, has furloughed staff at:
- The Bureau of Labor Statistics
- The Bureau of Economic Analysis
Hence the publication of monthly employment and inflation reports are kaput.
The Fed must balance inflation, jobs and interest rates
These data points are essential for the Fed’s dual mandate: maximum employmentand stable prices.
Anna Moneymaker/Getty Images
“The loss of data arrived during an uneasy period for policymakers,” said Yeva Nersisyan, an economist at Franklin & Marshall College.
“The economy could be at an inflection point,’’ Nersisyan told ABC.
Sticky Inflation vs. Weakening Jobs
The Fed’s preferred inflation gauge, core PCE (excluding food and energy), rose 2.9% year-over-year in August, still above the central bank’s 2% target.
Meanwhile, job growth has slowed dramatically.
The U.S. lost jobs in June for the first time in four years and added only 22,000 in August.
Fed Chair Jerome Powell has acknowledged the dilemma, calling it a “challenging situation” and a “turbulent period” for monetary policy. The central bank cut rates in September for the first time since December 2024, and markets overwhelmingly expect another 25 basis-point cut this month
But without fresh data, the Fed risks misjudging the economy’s trajectory.
“For as long as the government shutdown goes on, we will be operating a little bit blind,” said Michael Feroli, chief U.S. economist at J.P. Morgan. “But we think that in this current economic environment, it still makes sense for the Fed to cut in October”.
Meanwhile, political pressure mounts
Complicating matters further is the escalating, often nasty, tension between the White House and the Fed.
President Donad Trump:
- has repeatedly criticized the independent central bank’s rate decisions
- reportedly pushed for more aggressive cuts to stimulate growth ahead of the 2026 election cycle.
- Has demanded cuts as deep as three percent to boost the U.S. slagging housing market and reduce interest payments on national debt.
Former Fed and Treasury officials are aghast over the White House power plays
While the Fed is legally independent, recent moves by the administration to influence its direction have raised concerns among economists and former officials.
“The politicization of the Fed undermines its credibility,” said former Fed Governor Sarah Bloom Raskin. “Markets need to trust that decisions are made based on data, not politics.”
The White House’s efforts to frame the Fed’s actions as part of a broader economic strategy have drawn scrutiny and acute dismay.
Some analysts and economists, many from outside the U.S, have issued bold warnings this could erode investor confidence, especially if the Fed appears to be responding to political pressure rather than economic fundamentals.
Market reactions and risks
Despite the uncertainty, markets remain optimistic.
The Dow Jones Industrial Average and S&P 500 closed last week at record highs, buoyed by expectations of further rate cuts.
Bitcoin and gold also surged, reflecting investor hedging against inflation and geopolitical risk.
But some economists caution that the Fed’s decision could trigger volatility.
“If the Fed pauses rate cuts unexpectedly, it could spook markets,” said Jay Barry, head of global rates strategy at J.P. Morgan. “Investors are pricing in a cut, and anything else would be a surprise”.
Countdown to Oct. 29
As the clock ticks toward the October 29 meeting, the stakes are high, and the margin for error is slim.
“The Fed has to make a call with incomplete information,” said Nersisyan. “It’s like trying to land a plane in fog with half your instruments offline.”
Whether the central bank cuts rates again or holds steady, its decision will reverberate across markets, households, and the global economy.
And with Congress still deadlocked over funding, the fog isn’t lifting anytime soon.
Related: Bank of America jobs data may sway Fed interest rate cut bets
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