According to Forbes, Wednesday’s Federal Open Market Committee meeting revealed a central bank operating in what analysts call a “data vacuum” due to the ongoing government shutdown that has halted most economic reporting. Dario Perkins of TS Lombard noted the Fed appears “backed into a corner” after eight months of policy uncertainty from the Trump administration, exemplified by recent erratic tariff decisions including a 10% levy on Canada. The Fed faces conflicting pressures with inflation trending upward at 3% while unemployment shows concerning patterns, particularly among recent graduates. When Fed Chair Jerome Powell indicated that a December rate cut wasn’t guaranteed, markets reacted negatively with equity indexes dropping and Treasury yields climbing. This unusual combination of factors creates what analysts describe as unprecedented uncertainty for monetary policy.
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The Consequences of Flying Blind
The current situation represents one of the most severe data blackouts in modern Federal Reserve history. Without reports from the Bureau of Labor Statistics and Census Bureau, policymakers are essentially making trillion-dollar decisions based on incomplete private data and outdated September figures. This isn’t merely inconvenient—it’s dangerous. The Fed’s dual mandate of price stability and maximum employment requires real-time assessment of both inflation and labor conditions, yet they’re currently evaluating the economy with information that’s both stale and incomplete. Historical precedent suggests that policy mistakes made during data blackouts can take quarters or even years to correct, with consequences rippling through global markets.
The Ghost of Stagflation Past
While the article mentions stagflation as a possibility, it understates how dangerously close the current economic cocktail resembles the early stages of 1970s-style inflation coupled with employment weakness. The critical difference today is that the Fed lacks both the data to confirm this pattern and the political stability to address it systematically. What makes this period particularly perilous is that traditional monetary tools become ineffective when inflation and unemployment move in concerning directions simultaneously. Higher rates might cool prices but further damage employment, while stimulus could exacerbate inflation without meaningfully improving job prospects. This policy dilemma hasn’t been this acute since the Volcker era.
When Policy Becomes Personal
The article touches on tariff unpredictability but doesn’t fully explore how the personalization of economic policy creates systemic risk. The example of tariffs imposed over a political advertisement quoting Ronald Reagan demonstrates how economic decisions are becoming untethered from strategic national interest. This matters profoundly for the Fed because monetary policy typically assumes some level of fiscal predictability. When trade policy, government funding, and economic strategy become subject to personal whims rather than institutional processes, the Fed’s models break down. The central bank now faces not just economic uncertainty but fundamental questions about whether traditional economic relationships still hold in this new environment.
Beyond the Immediate Market Reaction
While the piece notes markets “wigged out” at Powell’s comments, the deeper concern is what happens when investors lose confidence in the Fed’s ability to interpret economic conditions accurately. The TS Lombard analysis correctly identifies the data vacuum, but the implications extend far beyond the next rate decision. When market participants cannot anticipate Fed actions because the Fed itself lacks visibility, risk premiums across all asset classes must increase. This means higher borrowing costs for businesses, more expensive mortgages for homeowners, and diminished returns for retirement accounts—effects that compound the very economic weakness the Fed seeks to address.
Navigating the Fog
The most concerning aspect of this situation is that there’s no clear resolution path. Even if the government reopens tomorrow, the data gap will take months to fill properly. Meanwhile, the Fed must decide whether to prioritize fighting inflation or supporting employment with incomplete information about both. The historical Reagan-era wisdom about trade barriers hurting American workers now applies to information barriers as well. Without reliable economic data, the Fed risks making policy errors that could damage the very consumers and businesses it’s mandated to protect. The coming months will test whether modern central banking can function when its eyes have been forcibly shut.
