A U.S. government shutdown may affect interest rates — in Canada, too

U.S. statistical agencies that provide key economic data to the U.S. Federal Reserve are among the agencies impacted by a shutdown, and an interest rate meeting is looming.

A partial U.S. government shutdown will likely have a domino effect on the next interest rate decision by the U.S. Federal Reserve, economists say, and Canada could see resulting impacts as well.

Many U.S. agencies’ work came to a standstill and hundreds of thousands of employees were furloughed starting at midnight Wednesday after lawmakers failed to reach a short-term funding agreement.

Among those affected are the statistical agencies — including the U.S. Bureau of Labor Statistics and the U.S. Census Bureau — whose economic data is relied upon by the American central bank in deciding whether to change its baseline interest rate.

If the shutdown persists, economists agree that a compounding lack of data will make it more likely the Fed will keep the rate steady, despite facing intense political pressure to keep cutting amid growing economic uncertainty.

That will have implications north of the border, said Gary Hufbauer, a non-resident senior fellow at the Peterson Institute for International Economics.

“If interest rates in the U.S. are not cut in October by 25 basis points, that will certainly surely affect Canadian interest rates,” he said in an interview.

The Bank of Canada and the U.S. Fed are set to announce their respective interest rate decisions on Oct. 29, after reviewing the latest domestic and global economic data.

Both central banks delivered their first rate cuts in months on Sept. 17, though the U.S. Fed had waited since December 2024 to shave 25 basis points off its rate.