The looming U.S. government shutdown could disrupt the release of September's Consumer Price Index (CPI), a vital inflation metric, leading to potential reliance on an alternative index, according to strategists from Morgan Stanley, including Ellen Zentner. This situation was reported today, Friday, and could have significant implications for Federal Reserve policy-making.
Carol Schleif of BMO Family Office underscored the potential complications for the Federal Reserve's decision-making process in light of this disruption. The potential delay in CPI data could also influence the pricing of CPI swaps and Treasury inflation-protected securities (TIPS), a market of substantial size as pointed out by BlackRock Inc (NYSE:BLK).
Predictive market platform Kalshi has indicated a high likelihood of a government shutdown and consequent delays in data release, which could further impact the fixings market. This possibility may also influence the Federal Reserve's decision on the Personal Consumption Expenditures (PCE) measure, according to WinShore Capital Partners.
The PCE measure is another key indicator of inflation that the Federal Reserve monitors closely. The potential disruption due to a government shutdown could thereby introduce additional uncertainty into financial markets already grappling with inflation concerns.
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