The US federal government officially shut down after the US budget crisis.
As the 2025 fiscal year comes to an end, an agreement could not be reached on the budget that would provide funding to the federal government.
As a result, following the US Congress's definitive rejection of the budget agreement, the US federal government entered into a shutdown (temporary work stoppage) on the morning of October 1.
As a consequence, the publication of important economic indicators such as employment and Gross Domestic Product (GDP) data will be suspended.
In a scenario where a temporary budget is not accepted, the government will lose its spending authority, halting all activities other than essential services, and those not working in essential services will be put on indefinite leave.
While uncertainty continues in the US, concerns about the FED's interest rate cuts have increased. Since the FED, which makes interest rate decisions based on the announced economic data, will not have many important economic data ahead.
While it is wondered how the FED will act at this point, Citibank economists indicated that despite the risk of missing important economic data due to the government shutdown, they expect the FED to continue making interest rate cuts for the remainder of the year.
At this point, Citi economists stated that the FED is likely to make a 25 basis point interest rate cut in October and December as indicated in the dot plot.
According to economists, the government shutdown in the US may hinder important labor and inflation data, forcing investors to rely more on private sources like ADP.
The FED may not have access to important reports related to employment and inflation before the FOMC meeting on October 29.
At this point, investors and the FED may take cues from less reliable private sector data such as ADP employment figures.
At this point, private sector employment data was released today in the US and came in below expectations.
Following this data, the markets began to price in a 25 basis point cut by the FED in October at 99% and a 25 basis point cut in December at 88.9%.
If the shutdown continues in the US, it is expected that the non-farm payroll report for September, which is scheduled to be released by the Bureau of Labor Statistics on October 3, will also not be published.
The FED is expected to announce its interest rate decision on the 29th of this month. The FED had made its first interest rate cut in September, referring to the weakening labor market, and had indicated the possibility of an additional cut in October.
Stay tuned for the latest developments