Breaking: December Fed Rate Cut Takes a Hit as Labor Department Cancels October CPI Report

The Federal Reserve heads into its December meeting with a whopper of a data gap after the Bureau of Labor Statistics canceled the Consumer Price Index (CPI) release for October. The agency said that it was unable to conduct crucial survey work because of the government shutdown. The missing report takes away from the Fed a crucial gauge of inflation that it consults while setting policy. 

Impact of Shutdown on October CPI Collection

The BLS had been scheduled to release the October CPI on Nov. 7. The shutdown prevented field staff from finishing the work needed to collect data. The agency builds the index using in-person visits, phone outreach, online tracking and household surveys. Those actions could not be taken during the shutdown, and the agency said it can’t now gather the missing information.

The November timeline for the CPI is also disturbed. The BLS has changed the release date to Dec. 18 from Dec. 10. The shift means the reading will be published eight days after the Fed announces its policy decision. The central bank now has to depend on other evidence for the two lost inflation snapshots.

Minutes of the Federal Open Market Committee’s late-October meeting showed concerns about holes in economic information. The committee did reduce rates by a quarter-point at that meeting. The shutdown hit several data streams that the members rely on to gauge what current conditions are.

The missing October CPI compounds those challenges. It eliminates a closely watched measure of movements in prices across the economy as a whole. The Fed will consider labor statistics, spending data and other available reports in its review. The canceled release serves as a case in point for how a shutdown disrupts core statistical work when it is most important for monetary policy.

Fed Officials Signal Caution

Jerome Powell, the chair of the Federal Reserve, said that the current data gap is temporary. The Fed is going to collect every scrap of data it can, and analyze it with great care, he said. Powell likened it to driving through fog. The only safe play, he said, is to slow down. This backdrop could nurture a more cautious approach on future policy moves, he said.

The New York Fed president, John Williams signals near-term easing, that the Fed might still have some room for a further cut in the near term. His comments suggest the door is open for another policy cut.
Federal Governor Christopher Waller said there was still enough information for policy makers to make decisions. He said, the shutdown opened up gaps but not a total loss of usable data.