Key economic data absent, the Federal Reserve moves forward "in the dark," officials hint at a "cautious rate cut" in October

According to the Zhitong Finance APP, the Federal Reserve is set to hold a monetary policy meeting on the 28th and 29th of this month. However, due to the U.S. government shutdown, key economic data is absent, making the policy-making environment more ambiguous than ever. Non-farm employment, retail sales, and some inflation indicators have all been delayed, leaving only corporate surveys and regional investigations for reference.

Federal Reserve officials generally prefer to adopt a "slow and steady" strategy in the face of incomplete information, with a potential rate cut of 25 basis points to continue the easing cycle while avoiding directional errors in unclear circumstances. The September meeting had already seen a rate cut, and several officials stated that the current fundamentals are not significantly different from then, supporting a slight rate reduction in October.

Chairman Jerome Powell recently stated that if the shutdown lasts for a long time, it will not only delay releases but may also affect data collection, making decision-making increasingly difficult. Governor Christopher Waller also pointed out that the lack of official data makes it harder to assess whether the labor market is continuing to weaken, whether demand is slowing, and the persistence of inflation shocks, while private data has limited informational value without comparisons. He still believes that the current situation supports another rate cut to reduce the risk of misjudgment.

Voices from local Federal Reserve banks also reflect this "cautious rate cut" tone. St. Louis Fed President James Bullard stated on Friday that if the labor market shows further weakness and inflation expectations remain anchored, he would support a rate cut, but he also warned that the room for easing is limited and that excessive loosening should not occur while inflation has not yet fully subsided. He emphasized that tariffs will continue to exert upward price pressure, which is expected to gradually dissipate only in the second half of 2026.

Boston Fed President Susan Collins previously acknowledged that typically inflation calls for restraint while labor market slowdowns call for easing, but balancing these becomes more difficult in the absence of data.

Market analysts point out that the current government shutdown may extend until November, at which point three months of concentrated data may be released at the end of the year, becoming crucial in determining whether to continue rate cuts before 2026. Historically, government shutdowns in the 1990s and 2010s also led the Federal Reserve to rely on informal information and adopt a cautious pace. This situation is similar, and the current meeting seems more about maintaining the status quo rather than signaling direction