Morgan Stanley expects the lack of economic data due to the US government shutdown will not prevent the Fed from cutting interest rates at its October meeting.
The government shutdown, which has now dragged on for three weeks, has delayed key reports such as employment and inflation data. This has made the policy outlook even more uncertain.
However, recent statements by Fed officials have indicated a willingness to continue easing monetary policy, with analysts saying that “no data is not a problem” as the central bank has seen enough evidence to act.
Markets are now almost certain to expect two more rate cuts, in October and December, after the 25 basis point cut in September.
Morgan Stanley also warned that the government shutdown could be prolonged and could cost the economy up to $15 billion a week if it continues.
