Government shutdown leads to loss of economic data, putting the Fed’s decision-making in trouble

XM Foreign Exchange APP News - The longest government shutdown in the history of the United States temporarily came to an end last night. The government funding bill passed by Congress was quickly signed into effect, and government functions and normal operations were restored. However, key data may face the risk of permanent loss. During the 43-day shutdown in December, the collection of core economic data came to a www.uniff.orgplete halt and the release of key economic indicators was delayed. The latest statement from the White House shows that due to the impact of the shutdown, October employment and inflation data may never be released. "All economic data that should be released has been permanently damaged, leaving Fed policymakers in a blind policy situation during a critical window," White House Press Secretary Carolyn Leavitt emphasized when talking about the U.S. central bank. Difficulty in market research and judgment: Reliance on sentiment and alternative data The data vacuum has cast a thick fog of uncertainty over the fundamentals of the U.S. economy, making it impossible for corporate decision-makers and policy makers to accurately judge the current economic operating situation. Chief market strategist Carl Shamotta said, "Our understanding of the economy can only rely more on market sentiment feedback rather than verified hard-core data." Financial services institution Corpay www.uniff.orgplained that economists and market players can only rely on private sector alternative indicators such as credit card transaction flows, satellite remote sensing data and industry surveys to infer economic trends. Key window period: Trade war superimposes data outage. Samota emphasized that this data outage coincides with a key time node. The deep uncertainty caused by the U.S.-Canada trade war continues to simmer, and the debate on the dragging effect of tariffs on the U.S. economy—whether it appears, how it will be transmitted, and when it will be implemented—is becoming increasingly fierce. U.S. President Donald Trump has claimed that tariffs will not cause inflation and will instead support the economy rather than damage it. However, mainstream economists generally believe that tariffs directly push upProduction-side costs also increase market uncertainty premium, thereby inhibiting corporate investment willingness and recruitment activities. In the context of the lack of clear and reliable data anchors, there is no substantive data to refute whether it is arguing that economic fundamentals are solid or that there is no upward pressure on inflation. The current interpretation of the economy can be called the Rorschach inkblot test in the field of macroeconomic cognition. "Essentially, this will create a layer of uncertainty that can be interpreted at will. It can be called the Rorschach inkblot test in the field of macroeconomic cognition," Shamotta said when referring to the psychological test - participants are required to describe the images seen in the inkblot, and the interpretation results vary from person to person. Typical controversy: A typical case of inflation judgment lacking data support is the sharp questioning faced by White House National Economic Council Director Kevin Hassett on the Financial Channel this week. Hassett said he believes inflation is gradually converging toward the Fed's target level. Later, he was asked, "As of September, inflation has been rising for five consecutive months. How to explain this fact?" Hassett downplayed this and cited the existing data since January. He responded, "If we observe it from the perspective of the beginning of the year, the data has periodic fluctuations and seasonal characteristics. But overall, the inflation performance is lower than market expectations - the market generally predicted that the upward trend would accelerate, but this trend has not actually occurred." Tim Doe, chief U.S. economist at SGH Macro Consulting, hit the core when retweeting the remarks: The government has no way of confirming whether inflation has accelerated. He emphasized on Twitter that "but the problem is... During the government shutdown, the relevant data collection work www.uniff.orgpletely stopped." Tariff lag effect: Risks of market fluctuations in the www.uniff.orging months During Trump’s first term, it took about eight months for the tariffs he imposed on steel and aluminum products to have a substantial impact on the U.S. economy and be reflected in the data. During this term of office, its tariff policy has just passed the eight-month window since its launch in March. Shamotta warned that "in the www.uniff.orging months, the market may face critical node risks: new data will trigger violent market shocks as soon as they are released, triggering a broader surge in volatility, or forming a negative transmission to the economy." Data recovery lags: Nearly 24 key reports are delayed Economists generally believe that even just restoring the collection and release of basic data will take some time. Oxford Economics pointed out that nearly 24 key economic reports have been forced to be delayed, and warned that as relevant agencies strive to catch up with work progress, the delay list will continue to expand. Policy puzzle: The Federal Reserve’s interest rate decision is in a dilemma. If you think there are problems with the U.S. economy, such as the president of JPMorgan Chase saying that there are cockroaches in private banks, the ADP data of the U.S. private sector, the data on challenger layoffs hitting a new high, etc., then the difficulty of data collection means that the U.S. economy cannot take medicine on time. If the best treatment time is missed, it will inevitably affect its subsequent development and even give rise to an important crisis. The issue at hand is that the Federal Reserve needs to make a key decision on interest rate policy next month. There are currently significant differences within the Federal Reserve on the direction of the economy: some members are pushing for further interest rate cuts, while others are calling for policy restraint, fearing that inflation may rebound again this fall. Oxford Economics Chief U.S.Economist Nancy Vanden Houten wrote that "the Federal Reserve is still mired in data fog and has difficulty in accurately anchoring policy direction." This data fog will continue to shroud the U.S. economy in the www.uniff.orging months. Economists, market players, and policymakers will have to wait until the new year to gain insight into the true fundamentals of the U.S. economy through reliable data. Affected by this, the CMEFedWatch interest rate tool shows that the probability of the Fed cutting interest rates in December has dropped to a 50-50 chance. At the same time, if we believe that making policies based on data is effective, then policies without data support may be harmful. Affected by this

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