Shutdown Slows Data Releases, Obscuring Fed’s December Rate Decision

Federal Reserve Chair Jerome Powell indicated on Monday that implementing another rate reduction in December would be "difficult," pointing to ongoing economic uncertainty and the government shutdown, which has postponed the release of essential data. These remarks arrive as traders, according to CME Group's FedWatch tool, are betting on a 90% likelihood of a 25-basis-point cut at the Fed's December 9-10 gathering. Still, analysts warn,

that the route to a rate cut is filled with obstacles, such as the risk of increased economic instability if the shutdown stretches past November.

The Fed's reluctance highlights widespread market concerns. Although the S&P 500 reached new highs this week amid hopes for looser monetary policy, investors are monitoring inflation figures and manufacturing data to anticipate the central bank's next steps,

. Early data from Automatic Data Processing (ADP) revealed slight gains in private-sector employment, averaging +14,000 over the last month—a sign of stability despite the shutdown. Nevertheless, the Fed's internal projections show only a 92% chance of a December rate cut, with another possible reduction in January if circumstances change.

Mortgage rates, which have dropped to 6.19% from 7% since the year's start, are drawing attention from prospective homebuyers. Specialists caution that holding out for further decreases could be risky, given the unpredictable timing of economic reports and the Fed's current policy approach,

. "Rates are already much lower than they were for most of this year," one analyst observed, adding that refinancing remains an option if rates fall further.

At the same time, the political environment is evolving. President Donald Trump's administration has released a shortlist of five contenders to succeed Powell as Fed chair, including current governors Christopher Waller and Michelle Bowman, former governor Kevin Warsh, and Rick Rieder from BlackRock,

. Trump, who has previously criticized Powell for not cutting rates sooner, intends to select a replacement before the year ends, introducing more uncertainty into the Fed's future direction.

The ongoing government shutdown, now in its fourth week, continues to drag on the economy, with weekly output losses estimated between $15 and $30 billion. While strong consumer spending and low joblessness have softened the impact so far, a prolonged shutdown could push the economy toward recession. The Fed's cautious approach highlights the challenge of curbing inflation without triggering a steep downturn.

As markets await Powell's remarks following the meeting, the central bank's communication is expected to influence the outlook for rate cuts in 2026. With the S&P 500 climbing nearly 4.5% since its October 11 low and technology earnings season underway, investors are eager for signals on whether the Fed will shift to a more accommodative stance.