Government shutdown disrupts Federal Reserve decision-making, September CPI becomes the only lifeline
The U.S. government has shut down again, and this time it directly affects the Federal Reserve's policy-making. The market predicts that the shutdown may last until the end of November or even later, with a probability as high as 75%.
The key issue is that the shutdown has prevented the release of other important economic data, and the September CPI to be announced on Friday has become the only important inflation indicator that can be referenced before the Federal Reserve's meeting on October 29. This is the first time CPI data has been released during a government shutdown since 2018, and its significance is evident.
The market generally expects that the Federal Reserve will definitely cut interest rates, but how much depends on the strength of the CPI data. If the data shows that inflation has cooled more than expected, the possibility of a 0.5 percentage point cut increases; if the data shows that inflation remains stubborn, then it might only be a 0.25 percentage point cut.
