How's the Federal Reserve supposed to navigate monetary policy when the government can't even keep the lights on long enough to count inflation properly? That's the question facing policymakers after a 43-day government shutdown in October 2025 left gaping holes in critical economic data. The Bureau of Labor Statistics couldn't release October numbers. November data went missing too. The Fed got radio silence during a pivotal period when inflation decisions matter most.
A 43-day shutdown erased two months of inflation data, leaving the Fed flying blind when precision mattered most.
December's inflation numbers arrived showing 2.7% annual growth, matching November's rate. Core inflation landed at 2.6%, its lowest reading since March 2021 and below the 2.7% forecast. Sounds promising. Monthly CPI ticked up 0.3%, exactly as expected, with the index hitting 324.054. But here's the kicker: nobody really knows what happened between September and November.
The BLS cobbled together a combined 0.2% increase for those two missing months. Food inflation registered at just 0.06% during that period. Energy jumped 1.08%. Headline CPI-U crept up 0.2%. These aren't real-time measurements, though. They're estimates filling the gaps left by political dysfunction.
Enter nowcasting. The Cleveland Fed stepped up with projections when actual data vanished. Their November nowcast pegged inflation at 2.65-2.70%. October estimates ranged from 2.70-2.76%. Fourth quarter CPI nowcast landed at 2.33%, with core at 2.18%. First quarter 2026 projections show CPI at 2.33% and core PCE at 2.43%. It's educated guesswork masquerading as precision.
The component breakdown tells a messy story. Shelter costs climbed 3.2% annually, contributing 0.4% monthly. That's sticky inflation right there. Gasoline prices dropped 3.4% monthly, providing some relief. Food prices accelerated to 3.1% annually from 2.6%. Medical care rose 3.2%. Household furnishings jumped 4.0%. Energy overall slowed to 2.3% from 4.2% annually. Currency markets face their own valuation challenges, with the WM/Refinitiv 4pm Fix serving as the daily benchmark rate used by institutions worldwide to value foreign exchange positions. Meanwhile, forex traders must navigate compliance requirements that govern how they can respond to these inflationary signals across international markets.
Core monthly CPI came in at 0.2%, below the 0.3% forecast. That's good news for the Fed. But can they trust numbers built on estimation and nowcasting? The data gaps complicate trend analysis precisely when clarity matters most. The Fed's forward guidance on future rate decisions becomes even more critical when the actual economic data proves unreliable. Projected inflation for 2026 sits at 3.7%, down from 4.2% in 2025. Maybe. If the lights stay on.
