The Federal Reserve’s final policy meeting of the year highlights an underappreciated consequence of government dysfunction: the paralysis of economic policymaking. With the Bureau of Labor Statistics shut down for six weeks, officials must decide on interest rates without crucial information about inflation and employment trends.
October’s economic data simply doesn’t exist. The government closure that halted the bureau’s operations meant no collection of price statistics or labor market figures for that month. November’s information won’t be released until later in December, after this week’s rate decision is finalized. This creates an unprecedented information vacuum during a critical period.
The Fed has reduced rates twice since September with half-point cuts, bringing borrowing costs to a 3.75% to 4% range. These moves represent a significant reversal from the aggressive tightening campaign that pushed rates to decades-high levels in 2022. However, determining whether a third cut is appropriate has sparked considerable debate among the committee’s voting members.
Chair Jerome Powell used a driving metaphor to describe the current situation: when visibility drops due to fog, the prudent response is to slow down. This cautious approach reflects the genuine uncertainty created by the data gap. Without October’s figures, officials cannot accurately assess how the economy evolved during a month of significant policy and market activity.
The challenge is compounded by concerning trends in the available data. Inflation accelerated from 2.3% in April to 3% in September, while unemployment climbed from 4% to 4.4%. These simultaneous increases on both sides of the Fed’s dual mandate create difficult trade-offs. As political pressure builds and Powell’s term approaches its May conclusion, the 12-member Federal Open Market Committee must announce Wednesday whether it will cut rates again despite operating with incomplete information about the economy’s true condition.