Data Blackout Dulls the Case for a 50bp Cut, as Fed Rate Cut Debate Meets Government Shutdown

TradingKey - Ahead of the upcoming FOMC meeting on October 28–29, Federal Reserve officials remain divided over the pace of rate cuts. Just as Governors Christopher Waller and Stephen Miran debate whether to cut by 25 or 50 basis points, the U.S. government shutdown has triggered an economic data “blackout,” potentially undermining the case for aggressive easing.

On the 16th day of the shutdown (October 16), the U.S. Senate rejected a temporary funding bill for the tenth time, prolonging the federal impasse. While the Bureau of Labor Statistics managed to release the September CPI report next week, many other key economic indicators still cannot be published during the shutdown.

Analysts say this data disruption comes at an especially awkward moment — as Fed policymakers must make decisions amid an economic landscape reshaped by Trump’s policy experiments.

On one hand, tariffs are pushing inflation higher; on the other, tighter immigration policies are suppressing job growth — directly impacting both legs of the Fed’s dual mandate: price stability and maximum employment.

After restarting rate cuts in September, most Fed officials project two more cuts this year, totaling 50 basis points. However, newly appointed Governor Stephen Miran stands out as an outlier.

Miran was the only policymaker to advocate for a 50bp cut at the September meeting. In subsequent public remarks, he expressed a desire to rapidly cut rates by 150 basis points to bring the policy rate down to what he believes is the neutral level.

On Thursday, Miran reiterated his dovish stance, calling for a 50bp rate cut at the October meeting, rather than the conventional 25bp. He argued that broader policy adjustments — including immigration reforms he believes will reduce inflation — provide ample room for the central bank to lower short-term borrowing costs.

Miran also pointed to renewed trade tensions between China and the U.S. as another reason for accommodative action. In his view, current monetary policy remains excessively restrictive, and the longer it stays that way, the greater the risk of economic downturn.

Meanwhile, Governor Christopher Waller emphasized that the Fed should proceed with caution, stating that a 25bp cut in October is appropriate.

Waller argued that tariffs have had limited impact on inflation, and while there are some warning signs in the labor market, policymakers need more data to guide their next move.

He noted that due to the government shutdown, the Fed will enter its October meeting without access to major economic reports, and private-sector data has sent mixed signals about hiring trends.

Miran countered that while economic data is helpful for assessing inflation trends and labor market conditions, even without it, the Fed must still make decisions — and must rely on forecasts to do so.

Matthew Luzzetti, Chief Economist at Deutsche Bank, said the lack of data makes it very difficult to convince a majority of the committee to support a more aggressive move. As a result, another 25bp cut in October has become the most likely path forward.

The Federal Reserve’s Beige Book, released this month, appears to support this outlook. Covering the period from August 26 to October 6, it found that overall U.S. economic activity changed little, continuing to reflect a complex mix of slowing growth, rising inflation pressures, and weakening labor markets.