Key economic data absent, Fed "feels its way forward" Officials hint at "cautious rate cut" in October

The Federal Reserve will hold an interest rate meeting on October 28-29, but due to the government shutdown, key economic data is missing, making the policy-making environment more uncertain than before. Non-farm employment, retail sales, and some inflation indicators have been delayed, leaving only business surveys and regional surveys for reference. Fed officials generally lean towards adopting a "small steps" strategy in the face of incomplete information, with a 25 basis point rate cut to continue the loose cycle and avoid making directional mistakes when the vision is unclear. The September meeting just cut rates and many officials believe that the current fundamentals are not significantly different from then, supporting a small rate cut in October. Chairman Powell recently stated that if the shutdown lasts longer, not only will the release of data be delayed, but it may even affect data collection, making decision-making increasingly difficult. Director Waller also pointed out that the lack of official data makes it more difficult to judge whether the labor market is continuing to weaken, whether demand is slowing, and the persistence of inflation shocks, and that unofficial data has limited information value without a control. He still believes that the current situation supports another rate cut to reduce the risk of misjudgment. Voices from regional Fed banks also convey this "cautiously lowering rates" tone. St. Louis Fed President Bullard said on Friday that if the labor market continues to weaken further and inflation expectations remain anchored, he would support a rate cut, but also warned that the room for easing is limited, and excessive ease should not be taken before inflation has completely converged. He emphasized that tariffs will continue to push up price pressure and is expected to gradually fade by the second half of 2026. Boston Fed President Rosengren previously admitted that while inflation usually requires restraint and labor slack requires easing, balancing under data absence becomes more difficult. Market analysts point out that the current government shutdown may continue until November, and by then the three months of dense data may be released at the end of the year, becoming the key to deciding whether to continue cutting rates before 2026. Historical government shutdowns in the 1990s and 2010s have also led the Fed to rely on informal information and adopt a cautious pace. In this case, the current meeting is more about maintaining the status quo rather than announcing a direction.