As the United States emerges from the longest government shutdown in modern history, the Federal Reserve faces a daunting new challenge: Steering monetary policy through a fog of missing data.
With key economic indicators delayed or suspended, including October’s all-important consumer price index, the central bank finds itself navigating blind ahead of its next rate decision in mid-December.
For Chair Jerome Powell and his colleagues, the absence of timely inflation and employment figures complicates an already delicate balancing act.
After beginning a cautious rate-cutting cycle in September, the Fed must now determine whether to continue easing or pause, even as conflicting signals from financial markets and global headwinds cloud the outlook.
Data Blackout at a Critical Juncture
Ordinarily, policymakers would be scrutinising a full suite of economic data, ranging from consumer prices to wage growth and retail sales, to assess inflation dynamics and household demand.
But with the Bureau of Labor Statistics and the Commerce Department shuttered throughout October, those numbers remain out of reach.
The result is a fog of war settling over the central bank just weeks before its December Federal Open Market Committee (FOMC) meeting.
RBC economists noted: “Once the government shutdown is over, data releases will be published with a lag.
"Since roughly two-thirds of price data feeding into the CPI measure is collected by personal visits by data collectors to bricks and mortar stores (and since we know that these workers are furloughed and in-person data collection did not happen in October), there is a chance that the October release is either cancelled altogether or that the majority of October data is imputed – which jeopardises the quality of the report.”
This was confirmed after the Bureau of Labor Statistics said it wouldn’t release the October jobs report following the impacts of the U.S. government shutdown.
"Household survey data from the Current Population Survey could not be collected for the October 2025 reference period due to a lapse in appropriations," BLS said in a statement.
Several economists cited by PBS noted that while the Fed prefers official government releases due to their methodology and reliability, the institution can fall back on private-sector data if necessary, though these are considered noisier and often less accurate.
Amid the rising uncertainties, investors are rapidly paring back expectations that the Fed will continue its easing trajectory.
As of 21 November, according to the CME Group FedWatch Tool, markets were pricing a 39.1% chance of a quarter-point cut in December, a move consistent with the gradual normalisation strategy Powell outlined in September.
Divided Voices Within the Fed
With the odds of a cut increasingly resembling a coin flip, commentary from Federal Reserve officials has been keenly monitored in the lead-up to the “live” meeting.
In Atlanta, Raphael Bostic noted in a recent speech that "evidence from surveys, buttressed by additional research and anecdotal input from price setters, reinforces my view that we cannot breezily assume inflationary pressures will quickly dissipate after a one-time bump in prices from new import duties.
“Across all our information sources, I see little to no evidence that we should be sanguine about the forward trajectory of inflation.”
He also added that “serious trouble awaits if inflation expectations for the medium- and longer-term drift upward and influence behaviour in ways that produce higher long-run realised inflation.
"Should those things happen, history suggests that some pain, in the form of higher unemployment, could be required in order to move inflation expectations back into the long-run target range.”
It was an ominous tone for the Atlanta Federal Reserve President, who recently announced his resignation.
New York Fed President John Williams also struck a cautious tone, warning that tight liquidity conditions in funding markets might require intervention.
Williams hinted that the Fed could soon restart bond purchases, not as a form of quantitative easing, but to manage short-term market stress. “We’re evaluating the best tools to ensure smooth functioning,” he told Reuters this week.
Meanwhile, Governor Christopher Waller acknowledged the complexities of policymaking in an era of conflicting data and technological shifts, arguing that the Fed must be prepared to adjust its stance even when information is imperfect.
“Based on what I know today, I support continued easing of monetary policy from its current setting, which I judge is moderately restricting aggregate demand and economic activity.
"But I also see a conflict right now between data showing solid growth in economic activity and data showing a softening labour market.
"So, something's gotta give—either economic growth softens to match a soft labour market, or the labour market rebounds to match stronger economic growth.
"Since we don't know which way the data will break on this conflict, we need to move with care when adjusting the policy rate to ensure we don't make a mistake that will be costly to correct.”
The next week, Waller reiterated his comments: “I am not worried about inflation accelerating or inflation expectations rising significantly,” Waller said in prepared remarks delivered to a group of economists in London.
“My focus is on the labour market, and after months of weakening, it is unlikely that the September jobs report later this week or any other data in the next few weeks would change my view that another cut is in order.”
Global and Technological Crosscurrents
Beyond the shutdown, global forces are adding new layers of uncertainty. Philip Jefferson has highlighted how artificial intelligence, automation, and stablecoin proliferation are reshaping labour and capital flows in ways traditional models struggle to capture.
In a 7 November address, Fed economist Stephen Miran warned that the rapid adoption of global stablecoins could exert downward pressure on interest rates, challenging conventional monetary transmission.
“Stablecoins can accelerate liquidity flows across borders, dampening the impact of domestic rate changes,” he said.
Meanwhile, delivering remarks to the University of Cambridge Business School, Miran also warned against using backward-looking data to determine the interest rate, noting:
“To keep policy so tight in response to an artifact of the statistical measurement process rather than any actual supply-demand imbalances in the economy will then create the labour market weakness that we were tasked with avoiding.”
Markets Brace for a Foggy December
In financial markets, the sense of disorientation is palpable. Treasury yields ticked back below 4% in late October, before jumping again in November as traders cut rate-cut bets amid hotter-than-expected inflation data.
Meanwhile, the U.S. dollar has lifted after weeks of volatility, trading at its highest level since 29 May, reflecting a growing belief that the Fed’s cutting cycle will proceed slowly and cautiously.
Equities, on the other hand, have rallied on the prospect of lower rates, though analysts warn that optimism could fade if inflation proves stickier than expected once official data resumes.
Looking Ahead
Even as Washington reopens and statisticians scramble to catch up, the lag in reliable data means the 17-18 December FOMC meeting may be shaped more by judgment than by evidence.
Powell is expected to stress patience and flexibility, underscoring that policy will remain “data-dependent” even when the data itself is missing.
Behind closed doors, Fed officials are likely to lean on high-frequency private data, real-time credit card spending, and corporate earnings signals to fill the void.
Yet none of these substitutes carries the credibility of government releases, making December’s rate decision one of the most uncertain in years.
For the Fed, the fog is both literal and metaphorical: A reminder that even in an age of big data, the world’s most powerful central bank remains vulnerable to blind spots.
