Bloomberg Surveillance Economic Impact of Government Shutdown
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Sep 30, 2025 Explore the economic ramifications of a potential government shutdown with insights on consumer resilience and K-shaped recovery dynamics. Hear about the looming Fed interest rate cuts and their implications for investors amid political uncertainty. Learn how gold's price rally has been influenced by safe-haven demand and ETF flows. The discussion also covers local community impacts and what the shutdown could mean for essential services like the TSA, shedding light on how markets react versus political sentiment.
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R-Star Is Trending Lower Post-COVID
- R-star (neutral real rate) fell after the Great Recession and spiked post-COVID, but is drifting back toward its longer-run declining trend.
- Slowing population growth and national savings are the main long-term drivers of a lower neutral rate.
Anticipate A Sequence Of Fed Cuts
- Expect rate cuts this cycle: Nomura forecasts cuts in October, December, and March under Powell.
- Prepare for additional easing after Powell as the next chair is likely more dovish.
Shutdown Hurts Data Flow More Than Growth
- A government shutdown mainly disrupts data flow and causes short-term GDP drag with later catch-up growth.
- The bigger issue is impaired data that can lock the Fed into planned policy moves without fresh information.