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Torsten Slok, chief economist for the Apollo asset management firm, recently released his set of“alternative data,” capturing information from a wide range of sources. This includes ISM PMI reports, which measure economic activity in the manufacturing and services sectors, and Bloomberg's robust data on consumer spending habits.

“Generally, the private data, the alternative data that we look at is better used as a supplement for the underlying governmental data, which is the gold standard,” Powell said in mid-October.“It won't be as effective as the main course as it would have been as a supplement.”

But at this crucial juncture, the Fed has also abruptly lost one important source of private data. Payroll processor ADP had previously shared private sector payroll information with the central bank, which considered it alongside government employment figures. Now, ADP has suspended the relationship, and Powell has reportedly asked the company to quickly reverse its decision.

With some key data unavailable, the Fed may pay more attention to the price of a cup of coffee to help determine how to set interest rates. Photo: Wikime Internal research

Fortunately for the Fed, it has its own sources for reliable information.

Even when government agencies are working and producing economic reports, the Federal Reserve utilizes internal research and its nationwide network of contacts to supplement data from the US Census Bureau, the Bureau of Labor Statistics and the Bureau of Economic Analysis.

Since the Fed is self-funded, the government shutdown didn't stop it from publishing its Beige Book, which comes out eight times a year and provides insight into how various aspects of the economy are performing.

Its October 15 report found that consumer spending had inched down, with lower- and middle-income households facing“rising prices and elevated economic uncertainty.” Manufacturing was also hit by challenges linked to higher tariffs.

Leading indicators

And though no data are being released on the unemployment rate, historical data show that consumer sentiment can act as a leading indicator for joblessness in the US.

According to the most recent consumer confidence reports, Americans are significantly more worried about their jobs over the next six months, as compared with this time last year, and expect fewer employment opportunities during that period. This suggests the Fed will likely see an uptick in the unemployment rate, once the data resume publishing.

And if you did notice an increase in the price of your morning coffee, you're not mistaken – both private and market-based data suggest inflation is a pressing concern, with expectations that price increases will remain at about the 2% target set by the Fed.

It's clear that there is no risk-free path for policy, and a wrong move by the Fed could stoke inflation or even send the U.S. economy spiraling into a recession.

Uncertain path ahead

At the Fed's September monetary policy meeting, members voted to cut benchmark interest rates by 25 basis points, while one member advocated for a 50-point cut.

It was the first interest rate cut since December – one that Trump had been loudly demanding to help spur the US economy and lower the cost of government debt. Following the October 29 interest rate cut, markets expect the FOMC to reduce rates by another quarter of a percentage point in December. That would lower rates to a range of 3.5%-3.75%, from 3.75%-4% currently, which would give the labor market a much-needed boost.