The Federal Reserve Is Still Dealing With The Shutdown's 'Data Fog'

Core Insights - The 43-day government shutdown has delayed and distorted key economic data, complicating the Federal Reserve's decision-making regarding monetary policy [2][10] - The Personal Consumption Expenditures (PCE) inflation report will not return to its regular schedule until April, covering only October and November data [3][10] - The Consumer Price Index (CPI) was also affected, with October data not collected and November data gathered later than usual, potentially distorting holiday sales data [4][10] Economic Implications - The lack of timely inflation data increases the risk of investors and policymakers being caught off guard when reports are finally released [5][10] - Federal Reserve officials are expected to maintain the current interest rate due to the uncertainty caused by the delayed data [5][10] - Policymakers face a dilemma between keeping interest rates high to combat inflation and lowering them to support the job market [6][10] Data Collection Challenges - The shutdown's effects may persist for months, particularly affecting housing cost measures, as the Bureau of Labor Statistics (BLS) had to estimate changes in rent and home ownership costs [8][10] - A methodological assumption of no inflation in October has led to an understatement of shelter inflation, which may not be corrected until April 2026 [9][10] - The distortion in housing costs could temporarily make inflation appear lower than it actually is, impacting household budgets and inflation calculations [9][10] Current Inflation Trends - Annual core inflation showed a decrease to 2.6% in December from 3% in September, but this may not reflect the true situation due to data distortions [11][10] - The "data blackout" during the shutdown has made it challenging for policymakers to assess the underlying inflation trend [12][10]