US Inflation Stat Faces Chaos as Government Shutdown Freezes BLS Data

Core Viewpoint - The U.S. is facing a significant disruption in its inflation data reporting due to government shutdowns, leading to a lack of Consumer Price Index (CPI) data for the first time in over a century, which complicates economic planning and market operations [1][3]. Group 1: Impact on Economic Planning - The absence of timely inflation data hampers household budgeting, corporate planning, and investor decision-making, resulting in a market operating on unreliable information [4]. - Economists and traders are now forced to navigate without the CPI, which has historically been a critical measure of inflation, leading to improvisation in economic assessments [2][3]. Group 2: Market Disruption - The lack of CPI data has led to the emergence of two fallback systems for inflation measurement, which are inconsistent: the U.S. Treasury assumes inflation will continue at the previous year's average, while ISDA has frozen inflation at last October's level of 3.01% [5]. - This discrepancy has created a distorted market environment, with Barclays estimating a breakeven rate of 3.05% for TIPS compared to just 1.78% for inflation swaps, indicating a significant divergence that could disrupt traditional pricing models [6]. Group 3: Federal Reserve Actions - The Federal Reserve has begun cutting interest rates, bringing the target range to 4.00-4.25% as of September, amidst concerns over economic slowdown and employment stability [7]. - Despite the Fed's easing measures, inflation has shown signs of re-acceleration, complicating the economic landscape and posing risks to bond real yields and equity valuations [7].