According to international officials, being rendered data-blind by the shutdown over time could make it more difficult for them to make decisions and increase the likelihood of making a mistake at a time when nations are already adapting to the Trump administration’s attempts to restructure international trade. In other words, what happens in America doesn’t stay in America. It’s a significant issue. At a press conference on October 3, Bank of Japan Governor Kazuo Ueda spoke on the challenges the BOJ faces in determining whether to start raising interest rates again. He said, “We hope this gets fixed soon.” A Japanese politician took it a step farther.
It’s a joke. The individual, who wished to remain anonymous because he was not permitted to talk in public, added, “(Federal Reserve Chair Jerome) Powell keeps saying the Fed’s policy is data-dependent but there is no data to depend upon.” According to Catherine Mann, a policy member at the Bank of England, changes in trade policy, for instance, have a greater impact on issues like prices and the outlook for exports than do concerns about U.S. data, the Fed’s independence debate, and other matters.
However, she pointed out that the British pound gradually lost its position as the world’s most important currency. This process took decades and was caused by a number of factors she called “termites,” which gradually reduced the pound’s influence. “We have things in mind, but they’re not front and center,” Mann said, referring to policy moves that would weaken the dollar’s value or undermine the Fed’s independence. However, “instead of something that is imminent, they are the termites.”
World Bank and International Monetary Fund (IMF) meetings are taking place in Washington this week, and in a world plagued by the ongoing European land war, Middle East tensions and violence, and long-term issues like climate change, much of the oxygen at the meetings is likely to be consumed by discussion of U.S. President Donald Trump’s plans for the world, his performance thus far in office, and, now, the abrupt halt of official information about a $30 trillion economy that makes up about one-fourth of global output.
The data flow could resume at any moment after the halt. However, the episode is indicative of a broader range of problems with U.S. governance and data integrity, such as Trump’s attempts to expand his power over the Federal Reserve and his dismissal of the head of the Bureau of Labor Statistics due to his ire over a jobs report that the IMF listed as one of the “downside risks” facing the world today. The IMF said in its World Economic Outlook released Tuesday that “intensification of political pressure on policy institutions could erode hard-won public confidence in their ability to fulfill their mandates.”
The public’s and markets’ confidence in official statistics may be damaged by pressures on technocratic organizations tasked with gathering and disseminating data, which would make it much more difficult for central banks and policymakers to make choices. Additionally, it increases the possibility of policy errors if political meddling compromises the timeliness, dependability, and quality of the data.
