Nailing their colours to the mast in 2025 and committing to following objective data when making rate decisions, the current government shutdown has suspended all collection and reporting of economic data by federal agencies, putting the Federal Reserve in a difficult position.
Naturally, it’s challenging to balance the dual mandate of stable pricing and employment when the most recent figures, particularly regarding their reaction to September’s 25-basis-point cut, are entirely unknown.
Ultimately, markets are predicting that a lack of economic data will force the Fed’s hand into performing a second back-to-back interest rate cut, especially considering that September’s NFP report left much to be desired, an outcome Fed Chair Powell will be keen to avoid repeating.
This holds true especially when considering that ADP payrolls, serving as our most recent and reliable private sector gauge of the US labor market, painted a less-than-stellar picture, losing 32,000 jobs in September.
As for US equities, we can consider any suggestion that rates will be lowered in upcoming decisions as positive for pricing, adding some rationale to recent upside.
