• Federal Reserve Chair Jerome Powell acknowledges that disruptions to economic data could impact the December policy decision.
  • The Fed's September rate cut brought the federal funds rate to 4.00%–4.25%, with markets expecting a further cut in October.
  • With key government statistics delayed, policymakers are relying more heavily on alternative indicators and private-sector data.

Federal Reserve Chair Jerome Powell indicated on Thursday that the central bank's path forward on interest rates faces heightened uncertainty, as a lack of official economic data due to the ongoing government shutdown could directly affect its December policy decision.

Speaking after the Fed's recent September meeting, where officials cut the benchmark federal funds rate by 25 basis points to a range of 4.00%–4.25%, Powell acknowledged that disruptions in official economic reporting mean the December policy decision may rely more heavily on alternative data sources or projections. Markets are currently pricing in a high probability of a follow-up cut at the October meeting, which would lower the target range to 3.75%–4.00%.

"The absence of timely, official data introduces additional uncertainty into an already complex policy landscape," Powell said, according to people familiar with his recent comments. The Fed did not immediately respond to a request for further clarification on his remarks.

This data blackout comes at a critical juncture. The Fed is attempting to navigate a soft landing, responding to slowing labor-market conditions—where unemployment has ticked up to 4.34% according to a Chicago Fed estimate—while inflation remains persistent. The most recent official Consumer Price Index report, from before the shutdown, showed both headline and core inflation holding steady at 3.0%.

The situation echoes past government shutdowns that have forced the Fed to operate with limited visibility. Officials have stressed that policy is not on a preset course and will respond to the "balance of risks" between inflation and employment. The lack of key reports on employment, consumer spending, and inflation means the Fed's traditional dashboard is largely dark.

Efforts to fill these data gaps are underway, with analysts and Fed staff turning to a patchwork of private-sector indicators. However, these alternative sources often lack the comprehensiveness and methodological rigor of government statistics.

Without clearer data, the Fed's projected path of additional easing—many officials anticipate about 50 basis points of further cuts over the next year—could become more cautious. The central bank's updated GDP growth projections for 2025, recently revised upward to 1.6%, reflect a cautious optimism about medium-term growth, but this outlook is now being tested in real-time.

Correction: An earlier version of this article misstated the current federal funds rate target. It is 4.00%–4.25% following the September cut.