Flying Blind

The government shutdown (now the longest in history at the time of this writing) has led to halted operations at critical economic statistical agencies such as the Bureau of Labor Statistics, Census Bureau, and Bureau of Economic Analysis. Consequently, Fed Governors have been left to operate without key data points on employment, inflation and economic growth for over a month. Despite the limitations, the Federal Open Market Committee announced another 0.25% cut to the Fed Funds Rate following their October 29 meeting as was widely anticipated. Market participants were pleased with the move, as well as the announcement on the winding down of balance sheet contraction by replacing maturing Treasury and mortgage-backed securities with U.S. Treasuries, rather than allowing them to roll off at the previously prescribed pace.

Chairman Jerome Powell, however, was keen to ensure Wall Street (and perhaps Washington) know he “won’t be pushed around.” This is reminiscent of the poker table talk by Teddy KGB (played by John Malkovich), the venerable character in the 1998 cult classic movie Rounders, starring Matt Damon and Edward Norton. Powell was quick to pull away the punchbowl in his post announcement press conference by dismissing the idea that an additional rate cut in December was a foregone conclusion. “Far from it” he pointedly added. He sullied investor optimism by stating that “there were strongly differing views about how to proceed in December” during committee discussions. The statements all but ensured that Federal Reserve Chair would not be among the top Halloween costumes in 2025.