Fed Faces Data Gap Ahead of December Meeting After CPI Report Canceled

TLDR

• The Federal Reserve faces a data gap as the October CPI report was canceled due to the government shutdown.
• The delay in the CPI report means the Fed will lack crucial inflation data ahead of its December policy decision.
• The BLS moved the November CPI release to December 18, eight days after the Fed’s policy meeting.
• Federal Reserve officials are relying on other economic data such as labor statistics and consumer spending.
• Jerome Powell emphasized the need for caution in policy decisions due to the lack of comprehensive data.

The Federal Reserve heads into its December meeting with an unexpected data gap, following the Bureau of Labor Statistics’ (BLS) cancellation of the October Consumer Price Index (CPI) report. The government shutdown prevented the BLS from completing crucial surveys. This has left the Federal Reserve without one of its most important inflation indicators as it prepares for policy decisions.

Federal Reserve Adapts to Missing CPI Report

The BLS had planned to release the October CPI on November 7, but the shutdown disrupted field operations. These operations involve in-person visits, phone outreach, online tracking, and household surveys, all of which are vital for accurate data. Without these data points, the BLS cannot gather the necessary information to complete the report.

The delay in releasing the CPI also affects the timeline for the November report. Initially set for December 10, it has now been moved to December 18. This delay means the CPI for November will be released eight days after the Federal Reserve announces its December policy decision.

In the absence of the October CPI report, the Federal Reserve must rely on other available data for its policy decisions. The Fed typically uses inflation data to gauge the broader economic situation. However, with incomplete information, policymakers will focus on labor statistics, consumer spending, and other available economic indicators.

The lack of data has raised concerns among Federal Reserve members, as reflected in the minutes of the October Federal Open Market Committee meeting. The Fed had already cut rates by a quarter-point at that meeting, acknowledging the need for more information. Now, the data gap complicates efforts to make informed decisions.

Fed Officials Offer Different Views on Future Rate Cuts

Despite the data gap, some Federal Reserve officials have expressed differing views on future rate cuts. New York Fed President John Williams indicated the possibility of further near-term rate cuts.

“The Fed might still have room for a further cut,” Williams said, signaling that the door is open for additional easing.

On the other hand, Federal Governor Christopher Waller emphasized that there is still enough information available to make policy decisions. He acknowledged the data gaps caused by the shutdown but did not see it as a total loss of usable data. His comments suggest that the Fed can continue to make informed decisions based on the data that remains.

In this uncertain environment, Federal Reserve Chair Jerome Powell has stressed the importance of being cautious. “We are driving through fog,” Powell said, referring to the data gaps. He emphasized the need for careful analysis of all available data and for a more cautious approach to future rate decisions.

The Federal Reserve now faces a delicate balance. It must assess the economic situation with limited data and decide whether another Fed rate cut is warranted.