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The most impactful release of the week was Friday’s Consumer Price Index (CPI) report. Both headline and core CPI came in slightly below expectations, with core CPI rising 0.2% versus 0.3% anticipated. Given the Fed’s preference for core inflation as a gauge of underlying price pressures, this softer print suggests inflation is sticky but trending lower, though still above the Fed’s target.

Economic developments during the week were shaped by key inflation data, central bank commentary, and disruptions caused by the ongoing government shutdown. Together, these events offered insight into the Federal Reserve’s evolving stance and the challenges of navigating a data-constrained environment.

The ongoing government shutdown has created a data vacuum, delaying key economic reports and clouding visibility for the Federal Reserve ahead of its next meeting. Markets now face the unenviable task of interpreting policy direction with limited official data, relying instead on supplemental and tangential indicators to gauge the economy’s trajectory.

Last week’s economic data painted a mixed picture of the U.S. economy.

The week began with key sentiment data from the S&P Global Manufacturing and Services Purchasing Managers’ Indices (PMIs). Both readings came in slightly below market expectations and last month’s figures, suggesting some softening in forward-looking sentiment. However, with Manufacturing at 52.0 and Services at 53.9, both remain above the 50 threshold, signaling continued expansion in economic activity rather than contraction.