What Will the Fed Do Without Key Economic Data? Will Rate Cuts Continue? Two Fed Members Speak Out!

The US government shutdown has negatively impacted government agencies. As a result, government employees were furloughed, and the publication of key economic indicators, such as employment and Gross Domestic Product (GDP), was suspended.

As uncertainty persists about how long the US lockdown will last, anxiety about the Fed's interest rate cuts has also increased. The Fed, which bases its interest rate decisions on released economic data, will be unable to provide much important economic data.

Citibank economists said they expect the Fed to continue cutting interest rates for the rest of the year, despite the risk of missing out on important economic data due to the government shutdown.

While there is very little time left for the FED's interest rate decision in October, statements have come from FED members.

Accordingly, San Francisco Fed President Mary Daly first stated in her statement that monetary policies were restrictive and pointed to further interest rate cuts.

Speaking at an event held at the Silicon Valley Executives Exchange, Daly said that the decision to cut interest rates last month was driven by the easing of the labor market and inflation, and that this decision signaled the possibility of further interest rate cuts by the Fed in the future.

“The economy is slowing down a bit. Consumers are running out of any excess savings they might have and are facing a higher price level. There's also a restrictive monetary policy.

The interest rate cuts we made were made to ensure risk management while bringing our inflation target and employment target into a more perfect balance.

Following the September rate cut, policy remains moderately restrictive and the Fed is considering further cuts as part of its risk management.

As a result, labor demand is weakening, necessitating interest rate cuts.”

Apart from Mary Daly, New York Fed President John Williams also signaled in his statement that he would be happy to lower interest rates again.

Speaking to the New York Times, John Williams signaled that the Fed will not hesitate to cut interest rates again despite concerns among some policymakers about rising inflation.

“The risk of a further slowdown in the labor market is something I've been very focused on,” Williams said, adding that President Donald Trump's trade tariffs haven't put as much upward pressure on inflation as many observers expected, and he sees no signs of any additional increases ahead.

“I think there's more downside risk to the labor market and employment, and this removes some of the upside risk to inflation,” Williams said, noting that he doesn't expect any additional inflation increases in the coming period.

*This is not investment advice.