U.S. faces imminent government shutdown with Fed ‘flying blind’ on key data

The U.S. is staring down another government shutdown, and this one could hit like a freight train. With less than a week left, Congress still hasn’t figured out how to fund federal operations.

Republicans and Democrats are deadlocked. Again. And this fight chokes off more than just government paychecks; it jams up the entire market!

According to reporting from Reuters, a shutdown would stall key economic data like inflation and jobs reports. That data is how investors and the Federal Reserve figure out what the hell is happening with the economy.

“The Fed could be flying blind,” said economists at Nomura in a note this week. They warned that without these updates, Fed officials might stick to their current forecast: two more 25-basis-point cuts before 2025 is over.

Federal agencies get gutted as shutdown seems imminent

This week, Donald Trump’s White House told agencies to prep for mass firings, not just temporary furloughs. It’s a big shift from past shutdowns, and not everyone knows what the move means. Some say it’s a way to pressure Democrats into accepting Republicans’ budget bill. Others think it lines up with Trump’s push to slash the size of the federal workforce.

The banking regulators and consumer watchdog, which are not funded by congressional appropriations, will remain functional.

Whatever the reason, regulators are on the chopping block. The SEC’s shutdown plan from October last year says most of its staff would be sent home, and only a skeleton crew would stay, which means no one to check filings or keep the stock market in line.

The Commodity Futures Trading Commission’s 2024 contingency plan says almost all of its workers would be furloughed. That means no regular updates on futures and options positions, reports that traders use to track how the market is leaning.

Banking regulators and the Consumer Financial Protection Bureau won’t be affected since they’re funded outside Congress. But even in 2019, a long shutdown jammed up Trump’s deregulatory plans because the Office of the Federal Register couldn’t publish new rules. Same risk now. If the shutdown drags on, federal rule-making could slow to a crawl.

A shutdown freezes the whole financial system. Without data, the Fed stalls. Without regulators, the market gets messy. Without the SEC, IPOs dry up. The longer it lasts, the worse it gets. And unless Congress pulls off a last-minute miracle, the countdown is almost over.

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