Fed Poised for Rate Cut Amid Data Gaps from Government Shutdown

Federal Reserve Chair Jerome Powell highlighted that the recent government shutdown has caused a critical lack of reliable economic data, particularly employment and inflation reports, which complicates the Fed's ability to make informed policy decisions. This data blackout has increased uncertainty around future rate adjustments, as the Fed depends heavily on comprehensive economic indicators to determine whether to raise, lower, or maintain interest rates. In response to a weakening labor market and amid this data gap, the Fed recently cut interest rates but faces internal divisions over the next steps, with some officials advocating for larger cuts and others opposing further reductions. The Fed also plans to halt the shrinking of its holdings of U.S. government debt and mortgage-backed securities to avoid tightening financial conditions further. President Trump has criticized Powell for not lowering borrowing costs more aggressively, while Powell emphasizes the need for a careful, data-driven approach despite the current lack of comprehensive information. Financial markets remain cautious as the Fed navigates an increasingly clouded economic outlook with limited data.