America’s central bank faces an unusual predicament as it prepares to decide on interest rates this week: making critical monetary policy choices without essential economic information. The Federal Reserve’s final meeting of the year highlights how government dysfunction can ripple through economic policymaking.
The Bureau of Labor Statistics shutdown, lasting six weeks during a broader government closure, eliminated October’s data collection entirely. This gap means Fed officials must evaluate whether to cut rates a third time without knowing how inflation and employment evolved during a crucial month. November’s figures won’t arrive until after the December decision is made.
The Fed has already reduced rates twice since September, implementing half-point cuts that brought borrowing costs down from decades-high levels to a range of 3.75% to 4%. These moves reversed the aggressive tightening campaign launched in 2022 when inflation peaked at 9.1%. However, achieving agreement on a third cut has proven contentious among the committee’s voting members.
Chair Jerome Powell described the current environment as akin to driving in fog, requiring a slower, more cautious approach. The challenge stems from simultaneous deterioration in both sides of the Fed’s mandate. Inflation has accelerated from 2.3% to 3% between April and September, while unemployment climbed from 4% to 4.4% during the same period. The central bank’s single policy lever—interest rates—cannot independently address both concerns.
Political pressure adds complexity to the deliberations. Reports indicate Kevin Hassett, currently serving as director of the national economic council, is under consideration to succeed Powell when his term expires in May. Hassett has been a vocal advocate for additional rate cuts, arguing they stimulate growth without inflationary consequences. The Federal Open Market Committee’s 12 members will announce their decision Wednesday afternoon, capping a year of unprecedented monetary policy challenges.