TLDR
- The Federal Reserve is facing a data gap as the October CPI report was canceled due to the government shutdown.
- The delay in the CPI report means the Fed will lack crucial inflation data ahead of its policy decision in December.
- The BLS moved November’s CPI release to December 18, eight days after the Fed’s policy meeting.
- Federal Reserve officials rely on other economic data such as labor statistics and consumer spending.
- Jerome Powell emphasized the need for caution in policy decisions due to the lack of comprehensive data.
The Federal Reserve enters its December meeting with an unexpected data gap, following the Bureau of Labor Statistics’ (BLS) cancellation of October’s Consumer Price Index (CPI) report. The government shutdown prevented the BLS from completing crucial surveys. This has left the Federal Reserve without one of its key inflation indicators as it prepares for policy decisions.
Federal Reserve adjusts to missing CPI report
The BLS had planned to release the October CPI on November 7, but the shutdown disrupted field operations. These operations involve personal visits, telephone outreach, online tracking and household surveys, all of which are essential for accurate data. Without these data points, BLS cannot collect the necessary information to complete the report.
The delay in releasing CPI also affects the timeline for the November report. Originally set for December 10th, it has now been moved to December 18th. This delay means that the CPI for November will be released eight days after the Federal Reserve announces its policy decision in December.
In the absence of the October CPI report, the Federal Reserve must rely on other available data for its policy decisions. The Fed typically uses inflation data to gauge the broader economic situation. However, with incomplete information, decision makers will focus on labor statistics, consumer spending and other available economic indicators.
The lack of data has raised concerns among Federal Reserve members, reflected in the minutes of the Federal Open Market Committee’s October meeting. The Fed had already cut interest rates by a quarter point at that meeting, acknowledging the need for more information. Now, the data gap complicates efforts to make informed decisions.
Fed officials offer different views on future rate cuts
Despite the data gap, some Federal Reserve officials have expressed differing views on future rate cuts. New York Fed President John Williams indicated the possibility of further short-term rate cuts.
“The Fed may still have room for a further cut,” Williams said, signaling the door open for further relief.
On the other hand, Federal Governor Christopher Waller stressed that there is still enough information available to make policy decisions. He acknowledged the data gaps caused by the shutdown but did not see it as a total loss of useful data. His comments suggest the Fed can continue to make informed decisions based on the data that remains.
In this uncertain environment, Federal Reserve Chairman Jerome Powell has emphasized the importance of being cautious. “We’re driving through fog,” Powell said, referring to data gaps. He stressed the need for careful analysis of all available data and for a more cautious approach to future interest rate decisions.
The Federal Reserve now faces a delicate balance. It must assess the economic situation with limited data and decide whether another Fed rate cut is warranted.
