17 Days of Government Shutdown
Government Shutdown Continues, Markets Stay Flat
Friday saw us reach another week without the Federal Government operating. Interest rate markets were relatively flat, continuing a sideways pattern with slight improvement. The 10-Year US Treasury Bond yields are sitting at the important 4.00 level. As stated last week, the government shutdown has caused there to be an absence of the normal economic reports.
CPI Report to Be Released October 24
We will be getting a special Consumer Price Index inflation report on the 24th from the Bureau of Labor Statistics. It was necessary to call some of the economists back to work even though they aren’t being paid. This CPI report is used by the Social Security Administration to set the changes to benefits for the 2026 calendar year. Federal Law pegs the change in benefits to the change in CPI.
Air Traffic Controllers’ Missing Pay Could Add Pressure
It is interesting to note that while U.S. senators are at an impasse over voting to fund the government, they are still getting paid. Their staff, on the other hand, are not. Another vital group that is not being paid is the Air Traffic Controllers. It appears that ATC employees will miss their first full paycheck on October 28. If that happens, will there be delays in air travel? If delays begin, this could add pressure to Senators to reopen the government.
Fed Expected to Cut Rates Again
The Federal Reserve (Fed) will be meeting on October 29. Fed Funds Futures (betting markets) show a 99.0% chance of another .25% rate cut. Fed Governor Waller came out this week and stated that he feels the Fed Funds rate is 1.25% above the neutral rate. That means they can cut five more .25% before they stop being restrictive on their monetary policy. If they want to spur the economy, they would want to cut rates below the neutral rate and would need to cut much more than the 1.25%. This is good news for further interest rate improvement.
Looking Ahead: Next Week’s Economic Data
Wednesday, October 22: Mortgage Apps, 20-year Bond Auction
Thursday, October 23: Existing Home Sales
Friday, October 24: Consumer Price Index
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