With the shutdown in full force, US CPI for October will likely be drastically delayed as well. The release of this essential economic barometer was supposed to occur on November 13. Now, it has been pushed back indefinitely, moving into a new, even more disheartening phase in the long data drought markets are currently enduring. This extended shutdown period has caused BLS to scramble in trying to protect survey work and output. This disruption is preventing the swift compilation and verification of vital inflation data.
The delay adds a complication for the Federal Reserve. Invariably, they were relying on the next CPI report to make their monetary policy decisions ahead of the December meeting. With no recent inflation data to go on, officials may be hard-pressed to justify any shift in policy with great confidence. This acute condition most deeply affects practitioners, such as the Cleveland Fed’s Beth Hammack, who need timely signals to inform their economic development lane.
Implications for Federal Reserve Policy
The delayed CPI release comes at a remarkable time for the Federal Reserve. The monetary authority’s December meeting looms large. It intends to wait for the October CPI data before taking stock of the current economic situation and setting the course for its policy. Absent this report, odds of at least this month’s interest rate-hike increase to a near certainty. Market participants are currently working through the impact of a long shutdown.
As the clouds of uncertainty continue to gather, so too have the expectations from market analysts on future increases in the Fed rate. The current consensus indicates a higher probability of maintaining existing rates through early 2026, reflecting the market’s response to the data void. Additionally, yields on government bonds have eased modestly in reaction to these developments, while long-end yields stabilize near recent lows as investors seek refuge in bonds amidst rising uncertainty.
Market Reactions and Future Outlook
The continuing government shutdown makes getting important economic data even more difficult, adding to the uncertainty in many asset classes. If the shutdown extends into November, it will further hold up release of key indicators, including the CPI. This stretch could set off a new round of turmoil in financial markets. Wall Street investors are watching these developments every step of the way as they recalibrate their plans amid this unprecedented long-term haze.
There is a possibility that a temporary funding deal may emerge next week, which could allow the Bureau of Labor Statistics to reschedule the CPI release. A quick resolution would probably trigger a risk-on rally in the near term as market players reassess with a little more optimism. If the government is completely reopened before Thanksgiving, then everything will return to normal data flow. This would provide the Federal Reserve outside clarity and consistency to ground its policymaking efforts.
Beyond the bond markets and interest rates, commodities are making their own adjustments amid the rapidly changing landscape. Additionally, gold prices are still hanging around the $4,000 mark as safe-haven demand and falling yields continue to provide support. This is representative of a larger trend of investors looking for safety as economic headwinds continue to increase.