BND Scope: Issue 14 -In a Shutdown Economy, the Fed Cut Rates

Annual inflation rose to 3% in September. There is some slowdown in the monthly pace; however, prices—especially in services—are still slow to ease. While energy and some goods categories are volatile, resistance in rents and services limits expectations for a rapid policy loosening. In short: the headline looks positive at first glance, but services inflation remains stubborn.

Closing

Inflation is around 3% and services inflation is sticky; the Fed is moving cautiously; the shutdown is imposing a real cost on the economy. By contrast, ADP data suggest hiring is turning up from the bottom. While USDOT’s decision increases uncertainty in aviation—especially for international partnership structures—the U.S.–Japan project list and the Meta–Blue Owl deal show that long-term investments remain lively. In the short run, data blind spots and cautious policy can keep volatility high; in the medium to long run, themes such as critical minerals, nuclear/energy, and data-center infrastructure are likely to keep guiding capital flows.

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The Fed cut the policy rate by a quarter point to the lowest level in three years. The message is clear: the next steps depend on economic data; there’s no guarantee of a December cut. This stance keeps caution against sticky parts of inflation while monitoring growth and employment risks. Market reaction is optimistic yet cautious.

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September inflation rose to 3%; prices in services are still slow to ease. The Fed lowered the policy rate to the lowest level in three years with a cautious step, but gave no firm signal for another cut in December. The federal government’s closure is adding a $7–14 billion burden to the economy and disrupting the flow of official data. ADP’s early indicators point to a moderate recovery in employment through mid-October. Because of decisions by USDOT (U.S. Department of Transportation), Delta and Aeroméxico have gone to court to protect their partnership. As Japan’s investments in the U.S. advance with concrete projects, Meta and Blue Owl set up a large-scale, sustainable financing model for a data center in Louisiana.

Inflation: Stuck Around 3%

A Measured Cut, Conditional Forward Guidance

The Economic Cost of the Federal Shutdown Is Growing

The federal government’s closure could impose a cost of $7–14 billion on the economy. Delays in spending and disruptions to the release of economic data also upset companies’ decision and planning calendars. When the government reopens, part of the effect is reversed, but not all of it is recovered; there is a risk of lasting losses, especially in deferred income and spending. In short, the shutdown is not just Washington’s problem—it’s the whole economy’s problem.

ADP Data Signal Positive Hiring

ADP’s weekly data show that private-sector employment turned positive again through mid-October. This isn’t a powerful surge; it’s more of a turn from the bottom. Even so, it matters for supporting household spending. If hiring continues without an excessive acceleration in wages, services inflation can stay under control.

Delta–Aeroméxico: Litigation Over the JV

After USDOT (U.S. Department of Transportation) decided to terminate the joint venture, Delta and Aeroméxico went to court to seek a stay of the decision. Suspending the partnership could pressure route planning, capacity, and pricing. Uncertainty ahead of the summer season may force airlines to rework network and fleet use. The decision also raises the question: “Are new rules about to be applied to cross-border partnerships?”

U.S.–Japan: A $550 Billion Project List

The two countries announced the first project list for the investment mechanism. Multi-year investments stand out across energy, critical minerals, semiconductors, and advanced manufacturing; nuclear (AP1000 and SMR) files are among the candidate projects. This list provides a concrete project sequence and visibility for supply-chain security and domestic production capacity.

Meta and Blue Owl’s Infrastructure Model

Meta formed a joint venture with Blue Owl funds for the Hyperion data center in Louisiana. The capital structure is mostly with Blue Owl; Meta takes the lead in construction and operations. The total development cost is in the tens of billions; the deal is framed with lease agreements and specific guarantee mechanisms. This model offers a sustainable financing approach along the axis between AI demand and physical infrastructure, creating long-lasting demand for construction, energy, and equipment supply.