Federal Reserve Policy Gets Messier Amid Data Gaps

Fed Faces Policy Decisions in the Dark

The Federal Reserve is tasked with managing interest rates amid high inflation and a slowing labor market. Now, the government shutdown threatens to complicate that job by delaying key economic reports, including this month’s jobs data.

Fed officials have endured shutdowns before, but today’s fragile conditions—rising prices and softer employment—make the absence of official numbers especially worrisome.

“It is a particularly difficult place to watch the data disappear,” said Mark Schweitzer, economics professor at Case Western Reserve University.

Without government reports, the Fed must rely on private sources like ADP payrolls, Indeed job postings, credit-card spending, and retailer earnings. But nothing substitutes for official inflation measures such as the consumer-price index, scheduled for release October 15 and now in doubt.

“It’s a critical time for the Fed to not have what I call the gold-star government data,” said Tara Sinclair, economics chair at George Washington University.

Divided on the Next Move

The Fed cut rates by a quarter point last month to 4%–4.25%, its first move of the year. Projections suggested two more cuts ahead, but officials remain split. Some warn that missing data could push the Fed to pause.

“If I were them, I would definitely be going on hold,” said Schweitzer, a former Cleveland Fed researcher.

Others expect policymakers to press forward. Claudia Sahm, former Fed economist, argued the central bank is already committed to supporting the labor market.

“One single quarter-point cut was not going to be sufficient,” she said.

The Fed isn’t flying blind, economists stress, but navigating with what Sahm called “a dirty windshield.” Private surveys and market reactions will help fill the gaps, though volatility may rise.

“This process could be a little messier,” Sahm added.