January 22, 2026 is shaping up to be one of the most consequential data releases in recent Federal Reserve history—not because of what it will reveal, but because of how much uncertainty it will resolve. The Bureau of Economic Analysis is scheduled to release catch-up Personal Consumption Expenditures data that's been delayed since the 43-day government shutdown ended, and the implications for markets could be profound.

The Data Blackout Problem

The government shutdown that began in late November 2025 and stretched into early January 2026 created an unusual challenge for investors and policymakers alike: a near-total blackout on critical economic data during a pivotal period for monetary policy decisions.

The Bureau of Labor Statistics couldn't release its October Consumer Price Index on time. The Bureau of Economic Analysis delayed Personal Consumption Expenditures reports. Housing data from the Census Bureau went dark. For 43 days, the American economy operated in a statistical fog.

During this period, investors relied on private-sector estimates, Fed nowcasting models, and educated guesses. The Cleveland Fed's Inflation Nowcasting tool became a critical reference point, using the "latest available nowcast for October 2025 CPI in place of the BLS October 2025 CPI release."

Why PCE Matters More Than CPI

While the December CPI report has already been released—showing core inflation at 2.6%, matching a four-year low—the PCE data carries special weight because it's the Federal Reserve's preferred inflation measure. The Fed targets 2% PCE inflation, not CPI inflation, and the two measures can diverge in meaningful ways.

"The Fed has been clear: PCE is what we watch. The CPI numbers give us a preview, but until we see the actual PCE prints, we're still operating with incomplete information."

— Federal Reserve official, speaking on background

The January 22 release will include October and November PCE data simultaneously, along with updated Personal Income and Consumer Spending figures. For markets that have been pricing in a June rate cut as the earliest possibility, any surprise in either direction could force rapid repricing.

The Estimation Challenge

Adding complexity to the picture: the Bureau of Economic Analysis has signaled it will estimate October inflation by averaging the September and November CPI components. This methodological choice could create discrepancies between the PCE numbers and what investors expect based on CPI extrapolation.

If the PCE data comes in hotter than the CPI-based estimates suggested, it could push rate cut expectations further out—perhaps into the second half of 2026 or even 2027. If it comes in cooler, it might revive hopes for an earlier move.

The Timing Complication

The January 22 release date creates an unusually compressed decision window. The Federal Open Market Committee meets January 27-28, giving policymakers just five days to digest potentially market-moving data before making their rate decision.

Markets have already priced in a near-certainty that the Fed will hold rates steady at this meeting, with the fed funds rate remaining in the 3.50%-3.75% range. But the Fed's forward guidance—the language about future rate moves—could shift significantly based on what the PCE data reveals.

A stronger-than-expected inflation reading might prompt the Fed to emphasize patience and data dependence, pushing market expectations for cuts further out. A weaker reading could introduce hints of easing to come, even if January itself sees no action.

Market Positioning Going In

Heading into the data release, markets have settled into a relatively comfortable consensus. Futures markets see only 16% odds of a rate cut in January, rising to more meaningful probabilities by June. The S&P 500 has recovered from its late-2025 swoon and is flirting with 7,000 for the first time.

This complacency could be vulnerable to disruption. If the PCE data surprises in either direction, the market's carefully constructed narrative—inflation gradually declining, Fed cutting slowly through 2026—could require rapid revision.

What to Watch For

Investors should focus on several key metrics in the January 22 release:

  • Core PCE year-over-year: This is the Fed's primary target. Anything above 2.9% would be concerning; anything below 2.5% would be encouraging.
  • Month-over-month trends: Even if the year-over-year numbers look manageable, accelerating monthly prints could signal trouble ahead.
  • Services inflation: The "super core" measure that strips out food, energy, and housing has been the stickiest component. Progress here would give the Fed confidence to eventually cut.
  • Personal spending growth: Strong spending combined with sticky inflation would argue for keeping rates higher longer. Weak spending with moderating inflation would argue for cuts.

The Second Repricing Risk

One underappreciated risk: the possibility of a "second repricing" if the PCE data diverges significantly from what the CPI data implied. Investors who took comfort from the benign December CPI report might find that comfort was premature if PCE tells a different story.

This creates the potential for a two-stage market reaction. First, the immediate response to the raw numbers. Second, the interpretive response as analysts work through the implications for Fed policy and the rate trajectory.

How to Position

For most investors, the prudent approach is to avoid making major portfolio changes based on a single data release, no matter how important. However, those with significant exposure to interest-rate-sensitive assets—bonds, REITs, utilities, growth stocks—should at least understand the potential for volatility.

The catch-up data deluge of January 22 represents a rare moment when months of accumulated uncertainty will be resolved in a single day. Whether that resolution confirms the market's existing narrative or forces a rethink, the information value alone makes this release one of the most important of 2026.