DBG - "New Federal Reserve News Agency" Latest Views: Government Shutdown Means Key Interest Rates Will Be Delayed

As the "deadline" for the government shutdown draws nearer, the release of dozens of blockbuster economic data affecting the Federal Reserve's November interest rate decision is likely to be extended indefinitely. According to Nick Timiraos, a Wall Street Journal reporter known as the "New Fed News Agency",Fed officials are walking a tightrope as they try to rein in inflation without causing an unnecessarily severe slowdown, which could mean they will have to "walk a tightrope blindfolded" if the government shuts down for a long time.

If Congress fails to pass a temporary funding measure by Sunday,The closure of certain institutions could delay the release of the latest economic data on wages, employment, inflation, and output.

Fed officials are poring over these indicators to see how the economy has responded to their past rate increases and to determine whether they have done enough to tame inflation. They left rates unchanged at 22-year highs at their meeting last week, but most said they expect to raise rates again this year if the economy performs in line with their expectations.

However, Timiraos pointed out that,A government shutdown lasting more than two weeks could deprive officials of key information on whether to raise interest rates at the November meeting.Federal Reserve Chairperson Jerome Powell said at a press conference last week:

"We're going to have to deal with this, and it's hard for me to say in advance how this will affect the November meeting."

The government shutdown could be one of several factors contributing to the uncertain economic outlook in the final months of the year, andThis could prompt officials to delay the decision to raise interest rates until DecemberOther uncertainties includeThe recent rise in oil prices、The steady rise in long-term Treasury yields、Auto workers' strikeandStudent loan recovery and repayment。

Timiraos said three government shutdowns in the past 30 years have delayed the release of some economic data.

In early 1996, due to the 21-day government shutdown, the December 1995 non-farm payrolls report was delayed by two weeks, and the widely followed CPI data was released nearly three weeks late, the day after the Federal Reserve's January 1996 interest rate cut policy meeting.

In October 2013, the release of the September inflation and employment report was delayed by nearly two weeks due to the 16-day government shutdown. Then-San Francisco Fed President Williams said at the time:

"The shutdown has delayed some data releases, but we are not acting blindly."

Timiraos also pointed out that,In addition to official data, officials have other "data supplements"For example, Williams at the time cited other data sources to supplement, citing an academic study developed by researchers at MIT called the "Billion Prices Project" as a "proxy" for the CPI inflation report.

Adobe, a digital media company, also released a digital price index to measure inflation in online goods and services, developed by economists and Chicago Federal Reserve President Bill Goolsbee.

It is worth noting that the partial government shutdown that began in late 2018 only delayed the release of some Commerce Department data, but it did not affect the Labor Department, which is responsible for compiling CPI and payroll reports, as funding has been approved by Congress and the White House.

The Federal Reserve, which does not rely on federal grants, will continue to issue regular reports on lending and factory output.

In recent years,Federal Reserve officials and other Wall Street forecasters are also using other private data to supplement official reportsEconomists at the Federal Reserve, for example, use data from ADP, the payroll processor, to calculate private sector employment, or "small non-farm". Job websites such as LinkedIn and Indeed publish their own indicators of job openings. Credit card companies and other Financial Institutions Group compile weekly data on consumer spending.

But this data is often used in conjunction with older government data, especially employment data, and if the Federal Reserve relies solely on private data to make a rash next move, the results may not be as they want.