Onome Amuge
The U.S. economy is venturing into unfamiliar territory, as resurgent inflation, a federal data blackout, and mounting political uncertainty leave policymakers and markets operating with limited visibility ahead of next week’s Federal Reserve meeting.
Friday’s release of September’s consumer price index, the first major economic report to emerge since the federal government shutdown began on October 1, underscored both the stubbornness of inflation and the fragility of the data environment guiding monetary policy. The figures showed prices rising 0.3 per cent on the month and 3 per cent year-on-year, their fastest pace since January, with energy and gasoline costs leading the gains.
Ordinarily, the CPI is one of several data points that shape Fed deliberations. But with key indicators such as unemployment, retail sales, and manufacturing output delayed by the shutdown, the inflation report now looms larger than usual. “The Fed is flying with one instrument,” said Julia Coronado, a former Fed economist and president of MacroPolicy Perspectives.
The data vacuum has sharpened attention on both the quality and timeliness of what little economic information is available. The Bureau of Labor Statistics, operating with limited staff, confirmed that unemployment data for September remains unpublished. Economists at Citigroup and Nationwide, using state-level filings, estimate that new jobless claims climbed to a seasonally adjusted 232,000 last week.
That cooling is central to market expectations that the Fed will cut interest rates next week — despite the uptick in inflation. JPMorgan Chase’s trading desk put the odds of a post-report rally in the S&P 500 at 65 per cent, citing investors’ belief that policymakers will prioritise job stability over price pressures. “Markets are betting that Chair Powell will view the rise in inflation as temporary and the labour data, even if incomplete, as more worrisome,” said Steven Englander, head of global G10 FX research at Standard Chartered.
Yet the Fed’s challenge is compounded not just by missing data, but by the policy environment shaping those numbers. President Donald Trump’s renewed tariffs on Chinese steel, European autos and Canadian lumber have rippled through supply chains, pushing up import prices and dampening hiring. The Yale Budget Lab estimates that the tariffs will raise household costs by an average of $2,300 annually, roughly $191 a month, an effect that economists say is now filtering into the CPI data.
Gasoline prices jumped 4.1 per cent in September, while overall energy costs rose 1.5 per cent. Food inflation slowed to 0.2 per cent, but remains nearly double its pre-pandemic pace.
A new Harris poll of 2,000 adults found that nearly three-quarters of respondents reported monthly household costs at least $100 higher than a year ago, and 40 per cent said their budgets were squeezed by $500 to $749 more per month. Inflation remains the top economic concern among voters, eclipsing jobs or interest rates.
Trump, who has claimed on Truth Social that there is virtually no inflation, now faces a credibility gap that may weigh on his re-election strategy. The disconnect between public sentiment and official rhetoric, analysts say, risks amplifying uncertainty among consumers and businesses alike.
In markets, the mood remains cautiously upbeat, with equity futures rising on Friday as traders bet that the Fed will lean dovish. Yet beneath the optimism lies a deeper unease: with the shutdown curbing data releases and Washington gridlock delaying fiscal clarity, the Fed’s models are running on partial information.
