The U.S. government shutdown isn’t just a political standoff — it’s turning into the final push that could lock the Federal Reserve into more interest rate cuts this year. With Washington gridlocked and data pipelines at risk, traders are treating October’s cut as a done deal.
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Markets Price It In
As of this week, futures are flashing a 100% probability of a Fed rate cut in October, and an 88% chance of another in December, according to CME’s FedWatch tracker. That’s a sharp jump since the shutdown clock started ticking at midnight Thursday.
The math is simple: the longer Capitol Hill stays frozen, the greater the pressure on Jerome Powell’s Fed to protect a fragile economy — even if inflation remains sticky.
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Shutdown = Missing Data, More Risk
Wall Street insiders are blunt. “The shutdown doesn’t just stall government — it stalls the data,” said Krishna Guha of Evercore ISI. Without fresh labor market numbers, Powell is likely to lean on “risk management” cuts, choosing to err on the side of easing rather than holding firm.
Bank of America economists agree: unless a strong September jobs report somehow clears the fog, Powell’s playbook points toward another rate trim at the Oct. 28-29 meeting.
Labor Market Feels the Heat
The CBO warns 750,000 federal workers could be sidelined daily, draining nearly $400 million in lost compensation. In the past, workers got backpay. But this time? Trump has hinted some furloughs may be permanent. If that happens, the labor market — already showing cracks with ADP reporting a 32,000 private payroll drop in September — could take a heavy blow.
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Why This Matters for Crypto
For risk assets like Bitcoin and Ethereum, the writing on the wall is clear: softer Fed policy = liquidity boost. Rate cuts tend to weaken the dollar and push investors toward alternative stores of value. The shutdown drama might be a headache for Washington, but crypto traders are treating it like a spark that could fuel the next leg higher.
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🔥 Bottom line: Unless Congress flips the switch soon, the Fed’s hand is forced. The shutdown doesn’t just dim the lights in D.C. — it lights up the path for more cuts, and risk-on markets like crypto are already front-running the move.$BTC