Following the US budget crisis that has been spoken for several days, the US federal government has officially been shut down.
As 2025 reaches the end of fiscal year 2025, agreements have not been reached based on budgets to fund the federal government.
As a result, the US federal government was closed (temporary halt) on the morning of October 1st after the US Congress explicitly rejected the budget contract.
As a result, key economic indicators such as employment and gross domestic product (GDP) data will be suspended.
In scenarios where temporary budgets are not approved, the government loses its spending authority, suspends all activities except essential services, and those who do not work within the scope of essential services will be placed on indefinite leave.
As uncertainty persists in the US, anxiety surrounding the Fed's interest rate cuts is rising. The Fed is based on interest rate decisions based on published economic data and cannot provide very important economic data.
Although there is curiosity about how the Fed will act at this point, Citibank economists said they hope that the Fed will continue to cut for the remainder of the year despite the risk of being stripped of important economic data due to government shutdowns.
At this point, City Economists said the Fed is likely to cut interest rates by 25 basis points in October and December, as shown in the DOT plot.
The US government shutdown could hamper key workforce and inflation data and force investors to rely more on private sources like ADP, economists say.
“The Fed may not receive any significant reports on employment and inflation prior to the FOMC meeting on October 29th.
At this point, investors and the Fed can get clues from unreliable private sector data, such as ADP employment data.
At this point, US private sector employment data was released today, falling below expectations.
Following these data, the Fed's 25-based point reduction in October was priced at 99%, while the 25-based point reduction in December was priced at 88.9%.
If the US closure continues, the Bureau of Labor Statistics is expected to not release its September non-farm salary report, scheduled for release on October 3rd.
The Fed is scheduled to announce its interest rate decision on the 29th of this month. The Fed made its first interest rate cuts of the year in September, citing weakening the labor market, suggesting the possibility of additional cuts in October.
*This is not investment advice.
