Shutdown deprives Fed of data it’s dependent on

Bloomberg

Just when the Federal Reserve most needs fresh data to keep its policy in sync with the US economy, the government shutdown is getting in the way.
Timely information on economic growth, jobs, consumer spending and inflation is always crucial to monetary policy making. Now, the longest shutdown on record is blocking the collection and reporting of many of these key numbers.
While fourth-quarter gross domestic product is due on January 30 — as the Fed wraps up a two-day meeting — a delay in the release is all but assured, given that the Commerce Department unit that produces the figures has been closed for a month.
The absence of some government figures is wreaking havoc elsewhere. Farmers aren’t getting Agriculture Department reports on crop supply and demand. Steel analysts don’t have the latest customs data that inform them about imports. And foreign-exchange traders are deprived of options numbers from the Commodity Futures Trading Commission that help them navigate the $5.1-trillion-a-day currency market.
The disruptions are especially problematic for the Fed right now, as policy makers are feeling their way toward a peak in the rate-hiking cycle — a period when theoretical frameworks are less useful and fresh data become even more important.
Unlike a year ago, the economy is also giving off mixed signals. The labour market and consumer spending look strong, but slowing global growth, the protracted trade war and the shutdown itself have darkened the picture. In addition, the housing market is struggling amid elevated borrowing costs and price gains.
“It’s always true that you don’t know where you are, you kind of know where you were a month or two ago,” said William English, an economics professor at Yale University and former senior Fed adviser. The data gaps mean “now there’ll be just greater uncertainty about the state of the economy, and that clearly creates its problems for monetary policy.”
Fed policy makers have recently indicated they will take at least a pause from their quarterly pace of rate hikes. Analysts expect that the lack of timely and comprehensive economic data makes it even more likely the Fed will do nothing for several months.
“It clouds the picture of how the economy ended 2018 and how it is starting the year off,” said Michael Feroli, chief US economist at JPMorgan Chase & Co., who formerly worked at the Fed. “It’s just one more reason to be patient.”
Meanwhile, Fed officials frequently emphasise the central bank’s reliance on fresh economic data is growing. “Several participants expressed the view that it might be appropriate over upcoming meetings to remove forward guidance entirely and replace it with language emphasising the data-dependent nature of policy decisions,” according to minutes of the December meeting.

Banks boost aid to customers as govt shutdown drags on
Bloomberg

Lenders across the US are bolstering assistance programs and evaluating how else to help their customers as the longest partial government shutdown in history threatens to extend through a second payday for furloughed federal workers.
Navy Federal Credit Union, a Vienna, Virginia-based lender with more 8.1 million members, is offering no-interest, no-fee loans up to $6,000 for its 100,000 affected customers. So far, 16,000 customers have enrolled, and the lender extended advances to cover a second pay period.