Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
The ongoing US federal government shutdown is significantly impeding the Federal Reserve’s capacity to evaluate the nation’s economic health, particularly regarding the impact of the trade war and trends in price and labor markets. This data disruption is further complicating existing disputes over interest rate decisions between President Donald Trump and the central bank.
Impact on Economic Assessment
Speaking at the Brookings Institution, US Federal Reserve Governor Lisa Cook joined colleagues in expressing concern over the lack of crucial government data. She noted that many data points routinely used to assess the economy, such as employment figures and price indices, are currently unavailable, making it a “challenging time to give an outlook speech.” Cook emphasized that the longer the shutdown persists, the greater the potential for further data disruption.
Federal Reserve’s Adaptations
In response to these data shortages, Fed officials are increasingly relying on alternative sources. These include figures from the private sector, direct outreach to businesses, anecdotal information, and state-level administrative data. These diverse inputs are being utilized to continuously evaluate the economic climate in real time.
Broader Context
The prolonged data disruption exacerbates the ongoing tension between President Trump and the Federal Reserve regarding monetary policy. Separately, Governor Cook is also involved in a legal dispute with the Trump administration concerning her position, adding another layer of complexity to her role within the central bank.
Key Takeaways
The persistent US government shutdown presents a substantial challenge to economic assessment, forcing the Federal Reserve to adapt its data collection methods. This situation not only clouds the economic outlook but also intensifies policy disagreements at a critical juncture for the US economy and its global trade relationships.
