Adding to the list of unintended consequences facing Donald Trump’s administration, the president’s effort to get the Fed to approve a larger interest rate cut is likely doomed from the start.
The culprit this time is not data that indicates it would not be advisable, but a lack of data because government analysts have been either fired or furloughed as part of the government shutdown.
Despite the Republican Party controlling both chambers of Congress and the White House, the refusal to negotiate with Democrats means there is no end in sight, which is a setback for the president.
Previously, it was reported that the shutdown meant the Bureau of Labor Statistics was unable to provide job numbers data. On Thursday, the Wall Street Journal reported that the Fed is also data-poor, making it difficult for the Federal Reserve officials to make an informed decision on whether a larger rate decrease is warranted.
According to the Journal, “The absence of new government data essentially locks in another quarter-point cut at the Fed’s next meeting in two weeks following a similar reduction last month,” adding, “The irony: The bid for a larger rate cut by President Trump and his allies is likely to go nowhere without clear evidence of a rapid deterioration in labor markets that those reports could provide.”
Fed Chair Jerome Powell admitted as much earlier this week at a conference when he stated, “From our standpoint, we’ll start to miss that data. If this goes on for a while, they won’t be collecting it, and it could become more challenging.”
The Journal report adds, “The data blackout comes at an unusually inconvenient moment because officials are navigating an economy reshaped by Trump administration policy experiments. Tariffs have raised costs for manufacturers and small businesses, which could push consumer prices up as companies pass along those costs.”
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