As a result of the US shutdown, the government will suspend all operations except essential services and many employees will be furloughed. This will negatively impact the functioning of government institutions, as many will continue to operate with limited staff.
At this point, the shutdown could also affect the FED, which acts based on economic data. This means that the FED may not have enough data to assess the economic situation and the continuation of interest rate cuts may become uncertain.
While the effects of the government shutdown in the US are being wondered, three FED members Austan Goolsbee, John Williams and Stephen Miran evaluated the effects of the government shutdown on the economy.
Speaking to CNBC, Goolsbee said the Fed is playing a double role, saying it’s wary of cutting interest rates too quickly because the threats posed by the shutdown could boost both inflation and employment.
“I’m a little nervous about front-loading interest rate cuts and waiting for inflation to come down.”
New York Federal Reserve Bank President John Williams, in his statement, did not directly comment on interest rate cuts.
Williams stated that there will always be unforeseen situations and that the FED should be prepared for these unforeseen situations.
At this point, Williams said central banks need to prepare strategies to operate in an environment of uncertainty, and that this uncertainty will continue “for the foreseeable future.”
Finally, Stephen Miran, who was recommended by Trump and elected as a member of the FED in recent weeks, predicted that the FED would have the data it needs by the next FOMC meeting.
Miran, who supports the Fed’s decision to cut interest rates further, stated that access to data is important for the Fed’s decisions.
*This is not investment advice.