Does Government Shutdown Affect the Federal Reserve Ability to Ease Policy? \ stacker news ~econ

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Does Government Shutdown Affect the Federal Reserve Ability to Ease Policy?

273 sats \ 7 comments \ @spiderman 18h econ

As Bitcoin exchange rate nosedives, plenty of media are pinning it on the continued shutdown, as they imply the (continued) shutdown means the Federal reserve will not lower the rate. Is the assumption really correct? I do not see what prevents JPowell from lowering rate should he want whether the government is shutdown or not.

Or does he depend on the government budget to lower rates?

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49 sats \ 4 replies \ @Undisciplined 18h

I've heard the Fed is not affected by shutdowns in the same way, so I doubt they're prevented from dropping rates.

42 sats \ 1 reply \ @denlillaapan 11h

don't think OP means in a practical/paying-bills sort of way...?

0 sats \ 0 replies \ @Undisciplined 6h

Maybe not primarily, but that's how I took the final question.

42 sats \ 0 replies \ @Bell_curve 17h

I think a shutdown increases the probability of a rate cut because Powell can't say we are worried about the labor market overheating, wages are outpacing inflation, etc etc

I wish he would say: the job market in the private sector is strong ergo no rate cut lol

11 sats \ 0 replies \ @teemupleb 7h

“The Federal Reserve is not federal and it doesn’t have a reserve.”

6 sats \ 0 replies \ @denlillaapan 11h

what's your mechanism for why continued shutdown -> not lower rate...?

By traditional macro, shutdown (marginally!) means less gov activity/spending, so lower GDP, pushing Fed more toward a rate cut

More critically: don't think the Fed takes the shutdown into account (it's minor, does almost nothing)

5 sats \ 0 replies \ @justin_shocknet 16h

The Fed isn't federal, FOMC meeting is on for tomorrow and market expectations for cut are nearly 100%

Whatever they do or don't do they can only blame on lack of government provided data.

I believe it's also expected they end QT, if that's combined with a bigger than expected cut they'll definitely cite the shutdown.