Shutdown Adds Twist to September CPI Release as Fed Weighs Next Rate Cut
The US Consumer Price Index (CPI) will be released on Friday for the first time since 2018, and this time under rather unusual circumstances.
The September inflation report, due this Friday, comes amid the ongoing government shutdown that has frozen most other federal data releases. This left the Fed with limited foresight ahead of its critical policy meeting on October 29.
No other major reports, including employment and retail sales data, will be released until the shutdown ends. But with CPI data coming just five days before the Fed’s October 29 meeting, things will be different.
“Something unusual is happening this week… not just 5 days before the Fed’s October 29 meeting,” wrote Adam Kobeissi.
The US CPI report is generally published once a month, usually on or about the 10th through the 13th of the following month. For example, August CPI data was announced on September 11. Meanwhile, July CPI data came on August 12.
Traditionally, CPI data is released by the Bureau of Labor Statistics (BLS) at 8:30 a.m. ET on Tuesdays or Wednesdays. This makes Friday releases extremely rare; The last time was in January 2018.
As for the timing of Federal Reserve meetings, the CPI is usually released 1-2 weeks before the Fed’s Federal Open Market Committee (FOMC) meeting. This gives policymakers enough time to analyze the data along with other indicators before deciding on interest rates.
Under these circumstances, the timing fueled speculation that inflation would rise. This could potentially pave the way for another rate cut. The Fed’s next move now depends almost entirely on this single inflation reading.
While markets are pricing in a rate cut close to 0.25 percent, investors are watching closely to see if softer CPI data could push policymakers to a more aggressive 0.5 percent cut.
“Currently the probability of a 0.25% rate cut is about 99%… If it comes in lower than expected, the chances of a 0.5% rate cut may increase,” one user said.
The September CPI report is expected to show that consumer prices continue to rise, according to analysts surveyed by MarketWatch. However, it may be at a slower pace than in August. Such a signal could mean that inflationary pressures may ease.
However, the overall picture still remains unclear. The ongoing government shutdown has disrupted data collection and added a layer of political and fiscal tension that could shape the Fed’s risk calculus.
Without updated data from the labor and retail sectors, policymakers may rely on partial or outdated data when assessing whether inflation has slowed enough to justify continued easing. Friday’s announcement is potentially the only clear data point ahead of the Fed’s decision next week.
