Federal Reserve Chair Jerome Powell will speak at a press conference following a two-day meeting at the Federal Reserve Committee held in Washington, D.C. on September 17, 2025.
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If questions remained about whether the Federal Reserve would cut key interest rates later this month, it is possible that the budget loggerhead, a few blocks away in the country’s capital, has solidified the move.
Especially if the impasse grows past days, Chairman Jerome Powell and his fellow central bankers will likely make a mistake on the paying side.
“The data delays associated with the US government closures are what we have determined is already firmly reduced the odds-on Fed rate at even more odds-on in October,” said Krishna Guha, head of Global Policy and Central Bank Strategy at Evercore ISI, in a client’s memo.
Combined with potential damage from the lockdown and continued concerns about the labour market, he added, it outweighs inflation concerns.
“Despite ongoing cautious words from Fed officials, it leaps further towards October, but reflects that the Fed reflects even lower probability after refurbishment to curb soft defaults for consecutive cuts until the end of the year, as shown in a projection released by the end of the year.
The narrow staff at the Federal Open Market Committee meeting in September show that by the end of 2025, they prefer not one but two cuts. Some people have expressed concern that tariffs can still drive high inflation. However, in most cases, the impact appears to be temporary and it is unlikely to halt the progressive softening trend that will regain inflation to the Fed’s 2% target in a few years.
According to CME Group’s FedWatch Tracker of Futures price, the market is priced 100% of the October cut in December and 88% of the time in another market. Both will be higher since lockout began midnight on Thursday.
Bank of America says history is likely to have ended by the time the lockdown meets October 28-29, with authorities going to update the data on hand. However, if the impasse continues up until then, bank economists have seen two reasons why FOMC members will vote to cut back.
“First, Job’s report (September) will be required (October) hold. If job data is not available (September) Chair Powell tends to drive another ‘risk management’ reduction.” “Second, the Fed will want to lean towards the risk of drawbacks from extended shutdowns, especially if government workers are fired.”
The Congressional Budget Office estimates that the government is staying dark every day means layoffs of 750,000 workers with compensation costs of $400 million.
In previous lockouts, workers were returned to work with Backpay. But President Donald Trump is threatening investigations into current federal pay levels and the possibility that some people are permanent.
According to the ADP, individual salaries fell by 32,000 in September, which could damage the already repeated labor market. The broader Bureau of Labor Statistics, which includes government workers, will not be released as scheduled for Friday if the closure continues.
